Flybe today issued a profits warning on the back of a ‘softening’ in the market following the summer.

The regional carrier reported a good revenue performance in the first half of the year against the backdrop of “increasingly adverse fuel and currency impacts”.

But recent trading “indicates a softening in the second half revenue outlook and the board now expects the full year adjusted profit figure to be lower than market expectations”.

The full year adjusted pre-tax loss is expected to be around £12 million against a 2017-18 loss of £19.2 million. This includes an estimated £29 million of adverse year-on-year impact from weaker sterling, fuel and carbon prices.

The announcement sent shares in the airline tumbling by more than 27% in early trading.

A strategy to reduce capacity to focus on the most popular routes has delivered both higher load factors and revenue per seat, Flybe said

Load factors in the second quarter of the year were up by 7.2 percentage points to 86.6%, a record for the summer season. Passenger revenue per seat was up 6.8% as capacity reduced by 10.0%.

For the first half as a whole, the load factor rose by 8 percentage points to 84.0%, with passenger revenue per seat estimated to be up 8%. But yield was down by 2%, half of which related to the impact of the removal of credit card fees from January 2018.

Adjusted profit before tax for for the first half of the airline’s financial year is expected to be similar to last year at £9.4 million despite year-on-year cost increases of £17 million from the lower value of sterling and fuel and carbon price increases.

However, Flybe added: “Consumer demand in domestic and near-continent markets has weakened in recent weeks and the board now expects this to continue into the second half. This together with higher fuel prices and weaker sterling will impact the expected H2 profit performance.

CEO Christine Ourmières-Widener said in a trading update: “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.

“Stronger cost discipline is starting to have a positive impact across the business, but we aim to do more in the coming months, particularly against the headwinds of currency and fuel costs.

“We continue to strengthen the underlying business and remain confident that our strategy will improve performance.”

Flybe had a total fleet of 78 aircraft at the end of September, down by two from March 31, having returned one end-of-lease Bombardier Q400 turboprop and one end-of-lease Embraer E195 jet, with the next E195 due to be returned in the coming weeks. A further E195 is due to leave the fleet to leave six of the regional jets in the fleet.

The airline is due to issue its interim results on November 14.

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