Flybe shares facing a bit of a rough landing

SHARES in Flybe hit turbulence yesterday, dropping 20 per cent, after a further fall in demand for UK domestic flights saw the airline issue a profits warning.

The carrier, which is still largely dependent on the UK market despite an expansion into Europe last year, said there was a “significant shortfall” in its third-quarter revenues compared to expectations and warned Q4 income was unlikely to make up for the performance.

Sales in the UK domestic market as a whole plunged 8 per cent during the closing three months of 2011 – a further deterioration on the 6 per cent fall seen in the first half of the 2011-12 financial year.

Flybe said it managed to increase market share and maintain passenger numbers by scrapping a planned increase in margins but yesterday’s update fuelled fears of a full-year loss. Investec analyst Andrew Fitchie believes Flybe is now heading for an £8.5 million annual loss, compared with a previous forecast of a £6.4m profit.

Flybe’s chairman and chief executive, Scots-born Jim French, said the decision to keep prices low in order to keep up passenger numbers would protect the carrier’s “long term potential”.

Shares in the airline closed at 55p, down 13.75p.