Flybe profit warning as consumer demand weakens

Shares (Berlin: DI6.BE - news) in airline Flybe have plunged after it warned full-year profits would be lower than expected following weaker consumer demand over recent weeks.

The stock dived by 40% on Wednesday after the regional carrier pencilled in a full-year pre-tax loss of £12m - compared to a forecast from one analyst that it would make a £7m profit.

Flybe said it had seen good revenue performance for the first half of its financial year and fuller planes during the summer season, though it has been impacted by higher fuel prices and currency volatility.

However, it said that consumer demand in its UK and European markets had weakened in recent weeks and that this - together with the effect of a £29m hit from oil price rises and the weaker pound - would impact full-year results.

Chief (Taiwan OTC: 3345.TWO - news) executive Christine Ourmières-Widener said: "We have made progress in driving our unit revenues across the summer season, but we are now seeing a softening in the market.

"We are reviewing further capacity and cost saving measures while continuing to focus on delivering our sustainable business improvement plan."

Flybe has been focusing on a strategy to reduce capacity and focus on its most popular routes and said in its latest update that this was delivering higher load factors - a measure of how full planes are - and better revenues per seat.

It had cheered investors when it delivered a positive progress report in July and said it was "looking forward to further progress towards sustainable profitability".

Earlier in the year, full-year profits for the year to the end of March were dented by the "Beast from the East" when icy weather resulted in hundreds of flight cancellations.