The firm posted a £19.9 million pre-tax loss for the year to the end of March, compared to a profit of £2.7m a year earlier. This was despite revenues rising 13.4 per cent to £707.4m.
• READ MORE: Flybe’s Scottish flights take off from Heathrow
Flybe said: “Despite the substantial progress in reducing the size of legacy fleet orders in 2015/16, Flybe has still seen significant capacity growth in a market where we witnessed slower growth in consumer demand.
“New routes and increased frequencies were targeted to cover marginal costs in the early years of operation, but do not contribute significantly to overall profitability. The capacity growth therefore had a negative effect on profitability.”
The results come after Flybe and Eastern Airways announced earlier this week that they would compete with Loganair on five Highlands and Islands air routes. The dramatic move follows the breakdown of a partnership between Flybe and Loganair, which ends in August.
• READ MORE: Highlands and Islands air battle launched
Loganair, which currently operates flights for Flybe, said it was “extremely disappointed” but it was “up for the fight” when it goes it alone in September.
Eastern will operate flights for Flybe between Sumburgh in Shetland and Edinburgh, Glasgow and Aberdeen, between Stornoway in Lewis and Glasgow, and between Kirkwall in Orkney and Aberdeen, from the same month. Flybe has pledged shorter journeys using faster aircraft on the routes, which are among the busiest it currently operates with Loganair.
Today’s figures show that Flybe was also stung by a £4.8m writedown linked to an IT upgrade and it anticipates further IT costs of around £6m relating to cancellation penalties on existing contracts.
Chief executive Christine Ourmières-Widener said the airline had moved to drive down costs while reducing its flight capacity, adding that the new financial year has started well.
She added: “I am truly passionate about the airline industry and I see tremendous opportunities for Flybe to connect and engage with communities and to establish a reputation for excellence in serving our customers.
“We will be successful in delivering by continually focusing on our costs, increasing our knowledge about who our customers are and what makes them tick, achieving industry-leading operational excellence and implementing a great digital platform.”