Flybe reports annual results

Eleanor Steed
By Eleanor Steed June 19, 2018 16:51

Flybe reports annual results

Flybe has reported a loss before tax adjusted for the revaluation of USD aircraft loans of £20.5 million for the full year to March 31, 2018, which is in line with market expectations.

Revenue increased by 6.4% increase in group revenue to £752.6 million compared to £707.4 million in the prior year. The loss before tax improved to £9.4 million from a restated loss of £48.5 million in FY2016/17. This latest loss includes £11.1 million of non-cash revaluation gains on USD aircraft loans.

The adjusted loss before tax increased to £19.2 million, with a 4.3% increase in EBITDAR to £140.0million.

Flybe’s net assets are £93.1 million compared to £124.9 million in the prior year, which were restated to include the £28.6 million impact of an E195 onerous lease provision and related impairment of maintenance assets.

The airline’s net debt (which is all asset backed) decreased to £59.1 million.

Flybe states that the initial stage of the Sustainable Business Improvement Plan (SBIP) has delivered significantly improved commercial performance, with load factor growing by six percentage points and a 10.1% increase in revenue per seat.

As previously announced, Flybe says that it has invested in improving the performance of its Bombardier Q400s to enhance aircraft reliability and on-time performance. It has also commenced its digital transformation to improve the customer experience and bring improved operational efficiency. The additional maintenance costs, onerous IT contract provision, reduced hedging gains and the weather disruption in Q4 have all impacted the adjusted loss before tax figure, says Flybe.

During the year, Flybe’s passenger revenue rose by 9.1% increase to £675.8 million compared to £619.3million in the previous year. The airline reports a 10.1% improvement in passenger revenue per seat to £53.79 compared to £48.84 in last year. There was a 7.7% increase in passenger volumes to 9.5 million.

Flybe reduced its seat capacity over the year by 0.9% in line with its fleet reduction strategy, with a 5.2% reduction in network capacity in the second half of the year.

Flybe continues to provide five ATR72 aircraft for SAS and it has commenced a new contract with Stobart Air, which started as a wet lease of two E195 aircraft in May 2017, converted to dry lease from November 2017. The Brussels contract ended during the year.

As Flybe’s target fleet size is 70 aircraft, the airline plans to renew Q400 leases on relatively young aircraft to achieve this target in the future – Flybe anticipates that the new leases will be “significantly cheaper” than the current contracts and this strategy will avoids major capital expenditure in purchasing new Q400 aircraft. Nonetheless, Flybe is planning to invest approximately £11 million over the next four years to ensure that the aircraft comply with new EASA regulations and also plans to separately evaluate further refurbishment investment in Q400 cabin interiors over the coming years to maintain high levels of customer experience.

Flybe says that it plans to retain its E175 jets for longer and busier routes, which have attractive economics for us on longer sector times. The airline decided to remove the nine E195 jets from its fleet in March due to these aircraft types being unprofitable on certain routes. Although it was concluded in March that these aircraft were “unavoidably loss making”, provisions were not made at that time.

Flybe predicts forward sales to be encouraging and that it expects a further 8.6% reduction in seat capacity as the fleet reduces. Flybe is 91% hedged for 2018/19.

“Flybe has made significant progress during my first full year as CEO,” says Christine Ourmières-Widener, Chief Executive Officer, Flybe. “With our fleet size under control, we are already delivering improvements to passenger yield, load factors and revenue.  Our Sustainable Business Improvement Plan, launched last year, is enhancing the business in a number of key areas including, network decision-making, revenue management and commercial performance. Profitability has however been impacted by higher maintenance costs, IT investment and the poor weather in the final quarter.”

“We now have a new senior management team in place, with greater aviation experience, and we are all focused on delivering the business plan through continued improvements to revenue, a renewed focus on cost reduction and therefore achieving profitability.”

Eleanor Steed
By Eleanor Steed June 19, 2018 16:51