Flybe warns over profits

Low fares regional airline Flybe has warned that first-half profits will be lower than expected, sending shares tumbling as higher maintenance costs compounded a tough airline market.

Flybe is to review its maintenance strategy with the aim of improving aircraft performance and costs. Shares fell nearly 20% after the warning, which comes against a backdrop of intense competition in the sector that has kept prices low and put several larger companies out of business.

Flybe said it now expected a first-half adjusted pre-tax profit in the range of £5m-£10m (€5.6m to €11.2m), down from £15.9m in the first half of its 2016-17 year. Flybe’s financial year runs to the end of March.

“While half-year profits are lower than expected, I am confident that we are still on a clear sustainable path to profitability in line with our stated plan,” chief executive Christine Ourmieres-Widener said.

“The increased maintenance costs are disappointing, but we are already addressing these in the second half and remain focused on improving our cost base and reliability performance.”

This year has been a tough one for the airline sector, with Air Berlin, Alitalia and Monarch all going into administration.

They struggled to stay competitive as rivals laid on more seats to vie for market share, hitting fares. Analysts said Flybe’s announcement was a clear disappointment in the short term, and that overcapacity in the industry could also weigh on the stock.

Meanwhile, Hungary’s Wizz Air has become the latest European carrier to move to shore up its post-Brexit flying rights by applying for a licence in the UK ahead of the country’s departure from the EU.

Flying rights are currently governed by EU-wide deals and because it is not part of the World Trade Organisation, the aviation sector has no natural fallback arrangement to protect flights if there is no deal between the UK and the EU.

Wizz Air UK will begin operations in next March if its application to the UK’s Civil Aviation Authority for an air operator’s certificate and operating licence is successful, it said. Wizz is listed in London, but the majority of its operations are focused on Europe. Wizz said that the move would see 100 jobs added to its base in Luton by the end of 2018.

Reuters


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