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Regional airline Flybe Group plc (LSE:FLYB) said the company’s resilience against the “challenging operating environment” enabled it to weather the storm only slightly scathed, as they finished the 2011-2012 fiscal year with a £6.2 million pre-tax loss.
The UK’s leading domestic carrier, with 28% market share, cited a declining market coupled with high fuel costs and increased taxation impacted the group’s profit, even as group revenue under management was up 14% from £595 million to £678.8 million.
In Line But Disappointing
“The headline result, in line with expectations but disappointing nevertheless, reflects the impact of a challenging operating environment,” stated Flybe’s Chairman and Chief Executive Officer, Jim French.
Domestic travel in the UK, according to the carrier, which operates from 14 UK bases and serving 102 airports across the UK, has declined 20% compared to five years ago, decreasing Flybe’s core market by 5%. Nonetheless, Flybe increased its total number of passengers by 2.2% to 7.2 million
The price of oil, which Flybe noted to be at the highest recorded in history at an annual average, resulted in a 15% increase in fuel costs incurred by the group, from £92.5 million from a year ago to £106.4 million, even as the annual fuel consumption was reduced by 0.8%.
The UK’s Air Passenger Duty (APD) was attacked by Flybe as being “inequitable” as the excise duty doubles for a passenger travelling between UK cities, making air travel costlier as the passengers carry over the burden of the tax.
“The UK APD domestic ‘double dip’ needs to be addressed. This is where UK domestic passengers pay APD twice, while those flying abroad pay just once because APD only applies to flights that start from the UK,” Flybe’s statement read.
Flybe stated about 11% of the group’s revenue in its UK operations went to APD, with more than 40% of the airline’s passengers carrying the burden.
“The rise in APD is symptomatic of successive governments failing to lay out an aviation policy which sets out specific goals and objectives to ensure that the UK has a 21st century transport infrastructure.”
Making Flying Better
During the 2011-2012 financial year, Flybe Group initiated a restructuring that divided the company into three segments Flybe UK, Flybe Europe, and Flybe Aviation Support to provide“greater focus and drive for the implementation of the Group’s growth strategy.”
Flybe UK initiated a “brand and product repositioning” under the campaign slogan “Making flying better” to “to positively differentiate Flybe from some of the negative perceptions of low fare travel.”
The campaign provided for enhancements in bookings, ticket types, as well as added services inflight tv programming and entertainment for free.
“We believe that ‘Making flying better’ is more than a slogan. It is a promise to our passengers that we will make flying better, more straightforward and fair and, as always, with a quality service-led approach,” Flybe stated.
Outlook and CEO Comments
Jim French, CBE, Chairman and CEO of Flybe Group, speaking on the challenge the company is facing ahead and the long-term goals the group envisions, said:
“We remain in a challenging environment. However, Flybe today is a business of real scale and substance, and one which has again demonstrated its resilience. Flybe is well placed to take advantage of any improvement in the UK macro environment and has a strong platform in Europe to leverage, leaving the Group strongly placed for the future.”
“We will continue to invest in the Group’s future ensuring that we maintain our market leading position in the UK regions and, at the same time, building a similar position across Europe.”
Company Spotlight
Flybe Group is the largest independent regional airline in Europe with more than 200 routes from over 100 airports in 18 European countries.
The company became public in 2010 and listed on the main market of the London Stock Exchange. At 2:00 PM GMT, Flybe shares were up 8.1% to 67 pence.
