Flybe is conducting a wide-ranging review in the face of soaring fuel prices, currency costs and Brexit uncertainty – including a sale of the airline.
The Exeter-based carrier confirmed that it is in discussions with a number of strategic operators about a potential sale.
The board of the UK regional airline today revealed that a “comprehensive review of various strategic options” was being undertaken “to address the current challenges facing the airline industry and maximise value for shareholders”.
The options include further capacity and cost saving measures, initiatives to strengthen the balance sheet and preserve cash resources, as well as a potential sale.
Financial adviser Evercore has been appointed to assist it with the review.
“There can be no certainty that an offer will be made, nor as to the terms on which any offer will be made,” Flybe said.
The disclosure came as the carrier reported a 54% plunge in profits to £7.4 million in the first half of the year, including the summer peak.
The adjusted pre-tax profit improved by £4.6 million year-on-year to £14 million.
This came as capacity was cut by 9% in the period and revenue fell by 2.4% to £409.2 million. A further 3% capacity cut is planned over the winter.
Passenger carryings rose marginally in the half-year by 0.6% to 5.2 million.
The figures follow the carrier issuing a profits warning last month.
The airline highlighted Brexit as remaining a “major uncertainty for the sector and the wider economy”.
Flybe said: “In relation to aviation, the various government papers on Brexit set out the issues facing the industry and failure to reach an agreement may put at risk, or damage, parts of the business.
“The ‘no-deal’ Brexit proposals give a 14-month stand off period, thus giving more time for consideration of alternative strategies and solutions if required.
“The board believes that an appropriate agreement will be reached, although it is also developing contingency plans including potentially reassigning contracts that could be directly affected.”
CEO Christine Ourmières-Widener said: “In line with our strategy, we reduced seat capacity in the first half by 9.0% delivering a 7.2% increase in revenue per seat.
“Continued improvements are being seen into quarter three which demonstrates the popularity of Flybe for our customers.
“However, there has been a recent softening in growth in the short-haul market, as well as continued headwinds from higher fuel and currency costs.
“We are responding to this by reviewing every aspect of our business, especially further capacity reduction, cash management and cost savings.
“This is already starting to have a positive impact, as shown by the improved first half adjusted profit before tax; however, we must do more in the coming months.
“We remain confident in the vital role that Flybe plays in UK connectivity.”
A fleet trimming plan remains “on track” to cut the number of aircraft down to 70 from 78 at September 30 and 80 at March 31.
The smaller fleet is delivering improvements in commercial performance with higher load factors and revenue per seat, the airline said.
Removal of the Embraer 195 fleet of larger regional jets will help further strengthen the performance by boosting load factors and yield as popular routes are flown by the smaller, and more cost efficient, Embraer E175 jets and the Bombardier Q400 turboprops.
A new passenger service system called E-fly aims to give customers a better service throughout, from searching for a flight to landing at their end destination.
A handover throughout the 2018-19 winter will help to drive additional revenues, improve efficiency and the online customer experience, according to Flybe.
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