Trading Statement
05-Oct-2011 RNS Number : 5802P
Flybe Group plc
("Flybe" or "the Group")
Close period trading update
Flybe, Europe's largest regional airline, is pleased to issue the following trading update, ahead of announcing interim results for the six months ended 30th September 2011 on Wednesday 9th November 2011.
In the first half of 2011/12 ('H1 2011/12'), despite retail and consumer weakness in the UK, Flybe delivered a strong revenue performance with an increase over the previous year in passenger revenue of circa 9% (circa 3% increase excluding the impact of the 2010 volcano). UK regions to European business city routes performed particularly well.
However, in line with many other UK consumer facing businesses, we noted in September a significant slow down in sales across our UK domestic network. As a consequence, the Group's total revenues for H1 2011/12 were circa 1% behind management's expectations, with costs in line with expectations.
H1 2011/12 saw a total of 6.4m seats flown, an increase of 0.2m over H1 2010/11. After adjusting for the impact of volcanic ash disruption in 2010, H1 2011/12 seat numbers were down on H1 2010/11 by 1.7% on an underlying basis, reflecting the flat year-on-year ('YOY') capacity programme implemented and announced earlier this year.
With the ongoing focus on optimising passenger revenue per seat, we are pleased to report that H1 2011/12 saw improvements in passenger numbers, load factor and both ticket and ancillary yields. This has resulted in a YOY increase in passenger revenue per seat of some 6%, continuing the trends seen in Q1 2011/12.
The acquisition of Finnish Commuter Airlines (a joint venture between Flybe and Finnair), which was announced on 1 July 2011, was completed on 18 August 2011. Flybe's share of the total acquisition price, including net cash at completion, was €21 million. This is the first step in fulfilling Flybe's strategic aim of increasing operations within continental Europe.
The Finnish business is now trading as Flybe Finland and, building on the significant growth opportunities the region presents, 10 new routes have been announced and are now on sale. The revised network will commence operation at the beginning of the IATA winter season on 30 October 2011. A full update on Flybe Finland will be given at the time of the interim results presentation.
Flybe Aviation Support
There are positive indications that MRO activity is building again after the low of 2010/11, although this sector is experiencing short term scheduling variations as airlines continue to restructure their plans.
Our newly opened training academy is now fully operational and is entering the sales development phase to generate third party revenues.
Balance Sheet and Fleet
As at 30 September 2011 the Group had total cash balances of £87.5 million.
In Q3 2011/12, Flybe will be taking delivery of its first four E175 regional jets (out of its firm order of 35 E175s announced in July 2010).
As previously announced, the seven Q400s identified for disposal in 2011/12 have been sold to Rand Merchant Bank, generating an overall modest book profit.
Together, these two fleet developments will continue the implementation of Flybe's strategic fleet plan.
Current Trading
It is too early to determine whether the September slow down in sales on our UK domestic routes is a short term reaction to the turbulent macro-economic environment, or whether this is a longer term market adjustment.
Flybe announced in May that it believed that the UK market would be weak in Winter 2011/12 and advised that it would therefore de-risk the business by removing growth aircraft for the period. Forward ticket sales revenue for the H2 2011/12 winter period slowed from early September and is currently up 1% YOY on broadly flat capacity, below management's previous expectations. The Board will continue to closely monitor trends and review its winter 2011/12 flying programme to ensure that capacity is optimally matched to demand.
The Board will provide a further update on 9th November 2011 at the time of the H1 results.
Jim French,Chairman and Chief Executive Officer, commented:
"In the first half of 2011/12, despite some gloomy statistics regarding UK retail sales, we have delivered good growth in passenger numbers, load factors and yields, particularly across our UK to European network.
"It is also pleasing to start the roll out of our European growth strategy and we are encouraged by the positive feedback we are receiving from our new partners, Finnair, on the re-organisation and development of our joint venture, Flybe Finland. Our European Division will continue to focus on the integration which is making excellent progress and will also continue to look for low risk opportunities to expand this business.
"The recent slow down in sales on our UK domestic routes is obviously a development we are closely monitoring. In previous years, Flybe has demonstrated the resilience of its high frequency business model by adjusting short term capacity to meet reduced demand and being prepared to cut costs. Our management team remains acutely focussed on these areas."