Flybe widens losses as costs rise

21st Jun 2013 08:09

Flybe widened its full-year losses, blaming an underlying decline in the airline's UK core domestic market, high fuel prices and other costs pressures. The carrier reported an adjusted loss before tax, restructuring and surplus capacity costs of £23.2m for the year to end of March, compared to a loss of £7.1m a year earlier. The company has taken action so far to bring costs down with phase one and two of its turnaround plan, Delivery and Future Direction. The plan is expected to deliver about £40m of annual cost savings in the next financial year and £50m the following year.As part of the strategy, the company agreed to transfer 25 pairs of arrival and department slots at London Gatwick to easyJet for £20m. The deal is expected to be complete in July 2013.The group has also deferred the delivery of 16 new E175 aircraft from Embraer to 2017 to 2019, instead of 2014 to 2015.Flybe said its results were in line with expectations. Revenue under management rose to 15.1% to £781.5m from £678.8m. However, its disappointing overall losses, which led to the launch of its turnaround plan, reflected the "combined impact of a further 1.0% underlying decline in Flybe UK's core domestic market during the year along with high fuel prices and other cost pressures, particularly in US Dollar denominated costs and in regulated areas such as airport charges and air navigation fees," the firm said. The group was also affected by restructuring costs of £8.0m and surplus capacity costs of £4.8m as a result of the implementation of the first phase of its plans to restore its divisions to profitability and positive cash generation. This first phase resulted in 240 people leaving the business through resignation or redundancy."During the year, we have taken difficult decisions as part of our turnaround plan, which have affected all our people," Chief Executive Officer, Jim French, said. "Challenging as they have been, these decisions were critical to ensuring the future success of Flybe."Flybe's balance sheet had total cash, including restricted funds, of £54.7m at the end of the period, down from £67.6m in 2012. Net debt rose to £66.3m from the previous year's £29.7m. Shares jumped 7.88% to 44.50p at 08:44 on Friday.RD