Flybe in the red as demand slows and IT issues impact

● Regional airline dives to £19.9 million loss because of over-capacity in fleet

Regional airline Flybe said slowing consumer demand and over-capacity sent it swinging to a loss last year.

The firm yesterday posted a £19.9 million pre-tax loss in the year to the end of March, compared to a profit of £2.7m in the previous 12 months.

This was despite revenue increasing 13.4 per cent to £707.4m.

Flybe said in a statement: “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 this week they would compete with Loganair on five Highlands and Islands air routes. The move follows the breakdown of a partnership between Flybe and Loganair, which ends in August.

Loganair, which currently operates flights for Flybe, said it was “extremely disappointed” but that 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.

Flybe revealed yesterday that it was also hit by a £4.8m writedown linked to an IT upgrade and it anticipates further IT costs of about £6m relating to cancellation penalties on existing contracts.

Chief executive Christine Ourmieres-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.”

The group said it had made “significant progress” in laying the foundations for future profitable growth, including being named by airline intelligence agency OAG as the best UK airline for punctuality and placed sixth worldwide.

Flybe added that the airline had also signed new codeshares with Virgin Atlantic, Air Berlin, Air India and Singapore Airlines