TIDMFLYB
RNS Number : 3242F
Flybe Group PLC
27 July 2016
Flybe Group plc
('Flybe' or 'the Group')
27 July 2016
Q1 2016/17 TRADING STATEMENT
FLYBE CONTINUES TO MAKE PROGRESS DESPITE TOUGH CONDITIONS
Flybe reports a solid start to the year, with sustained
passenger and revenue growth, in a challenging revenue environment
with significant yield pressure across the sector driven by a
slow-down in demand growth, accelerating industry wide capacity
growth and repeated industrial unrest in France which accounts for
c12% of Flybe's seat capacity.
Revenue growth continued
-- 15.5% increase in seat(1) capacity to 3.2m seats (Q1 2015/16: 2.8m seats)
-- 9.2% growth in passenger(2) numbers to 2.3 million (Q1 2015/16: 2.1m passengers)
-- 5.0% growth in passenger revenue(3) to GBP155.8m (Q1 2015/16: GBP148.4m)
-- This growth is delivered despite a slow start in April and
demand headwinds stemming from continued fear of terrorism,
concerns about macro-economic volatility and uncertainty around the
EU referendum vote.
Route network enhanced and expanded
-- Improved schedule quality on 52 existing routes via frequency increases
-- 24 new routes launched
-- New codeshares launched with Virgin Atlantic and Air India
-- New franchising arrangement launched with Blue Islands
Unit revenue erosion contained
-- 3.9% decrease in passenger yield(4) to GBP68.39 (Q1 2015/16: GBP71.15)
-- 4.1ppts decrease in load factor(5) to 70.0% (Q1 2015/16: 74.1%)
-- 9.1% decrease in revenue per seat(6) to GBP47.95 (Q1 2015/16: GBP52.73)
Continued reduction in unit costs
-- 3.2% reduction in UK cost per seat (including fuel) from GBP53.24 to GBP51.52
-- 0.3% reduction in UK cost per seat (excluding fuel)
New three year pay deal for all employees after successful union
ballots (pilots, cabin crew and engineers)
-- Pay increases agreed at an average of 2% per annum for the next three years
-- Employee alignment with shareholders through a proposed 5% of
salary share grant that will be implemented by September, subject
to AGM and court approvals
Recognition for strong and improved punctuality
-- Flybe was ranked by the CAA as the UK's most punctual airline
last year for the second consecutive year. The CAA's punctuality
statistics for airlines operating more than 30k flights a year
showed that 84% of Flybe's flights were on time, ahead of Ryanair
(82.1%), British Airways (72.7%) and easyJet (71.7%).
-- Flybe's performance also improved year-on-year from 82% to
84%, while overall industry performance was reported to have
dropped from 79% to 76.6% over 2014.
-- In Q1 2016/17 Flybe's On Time Performance (OTP) has been
impacted by ATC strikes and poor weather in line with other UK
airlines and declined 5 ppts to 82.4% (arrivals within 15
minutes).
Q2 2016/17 current trading (capacity and bookings as at 25(th)
July)
-- 14% increase in seat capacity vs. prior year
-- 1% increase in passenger revenue vs. prior year
-- 48% of seats sold vs. 51% in the prior year
-- 5% decrease in yield vs. prior year
-- 11% decrease in revenue per seat vs. prior year
Impact of Brexit vote and other external developments
Whilst it is too early to judge the impact of the Brexit vote on
Flybe, in the long run, Flybe's mission is unlikely to be affected
in a significant manner by the form of the UK's new arrangements
with the EU. 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 near term, however, consumer uncertainty about Brexit,
its economic impact and repeated terrorist incidents could have a
materially adverse impact on Flybe. Travel demand may weaken
further if consumer and business confidence suffers, not least
against a weaker pound.
Although Flybe has hedged 90% of its USD and fuel requirements
for this financial year, the impact of a stronger USD since the EU
referendum vote will have a negative impact of GBP2.5m on full year
profit, if rates remain at current levels, all things being
equal.
Saad Hammad, Chief Executive Officer, said:
"Flybe continues to make progress despite significant external
challenges. We delivered a solid quarter through vigorous
commercial execution and enhanced operational delivery.
"The current outlook is very uncertain and we have limited
forward visibility due to our late booking profile. We are yet to
see the full impact on demand of the devaluation of sterling and
the heightened consumer uncertainty after the Brexit vote. It is
also too early to assess the potential demand impact of recent
terrorist attacks.
"We are continuing to take action to reduce unit costs and
moderate our seat capacity growth, as demonstrated by our recent
deal with NAC to cancel a contractual obligation to lease an
incremental 9 aircraft. 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."
Enquiries: Tel: +44 (0)20 7379 5151
Flybe
Philip de Klerk, Chief
Financial Officer
Maitland Tel: +44 (0)20 7379 5151
Neil Bennett
Andy Donald
Flybe UK KPIs
Quarter Quarter Change
to to %
30 June 30 June
2016 2015
------------------------------- --------- --------- ----------
Seats and passengers
Scheduled seats (million) 3.2 2.8 15.5
Passengers (million) 2.3 2.1 9.2
Load factor (%) 70.0 74.1 (4.1ppts)
------------------------------- --------- --------- ----------
Revenue
Passenger revenue (GBPm) 155.8 148.4 5.0
Contract flying revenue
(GBPm) 7.8 2.4 226.4
Revenue from other activities
(GBPm) 2.9 2.3 24.8
------------------------------- --------- --------- ----------
Total Flybe UK revenue
(GBPm) 166.5 153.1 8.8
------------------------------- --------- --------- ----------
Yield
Passenger yield (GBP) 68.39 71.15 (3.9)
------------------------------- --------- --------- ----------
Passenger revenue per seat
(GBP) 47.95 52.73 (9.1)
------------------------------- --------- --------- ----------
Hedging
Flybe UK's current hedge books(7) @ 15 July 2016 are summarised
below (all hedges are forward swaps).
Jet fuel
-- Q2 2016/17 - 96% hedged at $561 per tonne
-- H2 2016/17 - 93% hedged at $538 per tonne
-- H1 2017/18 - 65% hedged at $476 per tonne
US Dollar
-- Q2 2016/17 - 98% hedged at $1.52
-- H2 2016/17 - 90% hedged at $1.50
-- H1 2017/18 - 73% hedged at $1.45
Carbon
-- Calendar year 2016 - 100% hedged at EUR7.53 per tonne
-- Calendar year 2017 - 52% hedged at EUR8.60 per tonne
Flybe UK currently has a broadly neutral position in Euro income
and expenditure.
Notes:
1. Seats represent the number of scheduled seats flown on Flybe scheduled services.
2. Passengers are customers with an issued ticket where the
ticket has charged a fare and/or a passenger surcharge and tax (if
applicable). This includes customers who purchase a ticket and do
not show up for the flight where, as is usually the case, the
ticket is non-refundable.
3. Passenger revenue represents total ticket and ancillary
revenue including hard block, Unflown APD less refunds (2015/16 Q1
Trading Statement stated passenger revenue of GBP147.7m excluded
hard block).
4. Passenger yield represents passenger revenue per passenger
(2015/16 Q1 Trading Statement stated passenger yield of
GBP70.33).
5. Load factor is the number of passengers divided by seats flown.
6. Passenger revenue per seat has been restated using the new
definition for passenger revenue (2015/16 Q1 Trading Statement
stated GBP52.12).
7. Based on anticipated fuel, USD and carbon requirements.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation ("MAR"). Upon the publication of this
announcement via Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public
domain.
Forward-looking statements:
Certain information included in these statements is
forward-looking and involves risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied by the forward-looking statements.
Forward-looking statements include, without limitation,
projections relating to results of operations and financial
conditions and Flybe Group plc ("the Group") plans and objectives
for future operations, including, without limitation, discussions
of the Group's Business Plan, expected future revenues, financing
plans and expected expenditures. All forward-looking statements in
this report are based upon information known to the Group on the
date of this Trading Statement. The Group undertakes no obligation
to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
It is not reasonably possible to itemise all of the many factors
and specific events that could cause the Group's forward-looking
statements to be incorrect or that could otherwise have a material
adverse effect on the future operations or results of the business.
Further information on the primary risks of the business and the
risk management process of the Group is given in the Annual Report
and Accounts 2015/16; these documents are available on
http://www.flybe.com/corporate/investors.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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