Flybe reports sustained growth despite tough conditions

27th Jul 2016 15:38

(ShareCast News) - Flybe, the largest regional airline in Europe, announced on Wednesday a good start to the year despite challenging conditions for the industry. Chief executive Saad Hammad said: "Flybe continues to make progress despite significant external challenges. We delivered a solid quarter through vigorous commercial execution and enhanced operational delivery."Flybe was ranked as the UK's most punctual airline for the second year in a row last year by the Civil Aviation Authority (CAA). The airline operates more than 30,000 flights a year with 84% of them on time, ahead of Ryanair at 82.1%. The airlines on time performance (OTP) however declined 5 points to 82.4% due to by Air Traffic Control (ATC) strikes and poor weather.For the first quarter of last year, the airline reported sustained passenger and revenue growth by 9.2% and 5%, respectively, despite a slowdown in demand, accelerating industry wide capacity growth and repeated industrial unrest in France, which accounts for around 12% of Flybe's seat capacity. Seat capacity has increased by 15.5% to 3.2m seats.At the same time passenger yield and revenue per seat fell by 3.9% and 9.1% for the same period. The cost per seat fell by 3.2% to £51.52.The firm attributes its slow start in April to continued fears of terrorism, macro-economic volatility and uncertainty around the EU referendum vote.Post Brexit, Flybe said it believed it was unlikely to be affected in the long run. "The UK remains geographically part of Europe with continuing important cultural, social and economic links with the mainland. Flybe connects regional communities increasingly underserved by other airlines and alternative modes of transport, fulfilling a vital social and economic need, independent of political arrangements."In the short term, however, Brexit could take its toll. "Uncertainty about Brexit, its economic impact and repeated terrorist attacks could have a materially adverse impact on Flybe," said Hammad. Demand may weaken further if consumer and business confidence suffers against a weaker pound.Despite hedging 90% of its USD and fuel requirements for the year the impact of the stronger USD will have a negative impact of £2.5m on full year profit if rates remain at current levels.The airline has expanded its network with 24 new routes, codeshares with Virgin Atlantic and Air India and a franchising arrangement with Blue Islands. The schedule quality has also been improved by increasing the frequency of 52 routes.For the second quarter ending 25 July 2016 seat capacity and passenger revenue increased by 14% and 1% respectively, while 48% of seats were sold. The yield and revenue per seat however fell by 5% and 11% respectively.Hammad was confident performance will continue to be strong in the future. "While we currently face significant external risks, we have a strong balance sheet and cash position as well as a disciplined and resilient organisation to take us forward"Performance for the company has improved year-on-year from 82% to 84% while overall industry performance dropped from 79% to 76.6% over 2014.Shares fell by 7.02% to 39.05p on Wednesday at 1537 BST.