Flybe shares down 30% on new profit warning
10.01.12
The shares of Flybe fell by 30 percent this morning after it issued a profit warning, its second in the last 12 months. Europe’s biggest regional airline said demand for travel in its main UK market is deteriorating and that it had failed to implement planned fare increases, meaning that it will not hit its revenue and profit targets for the third quarter of its financial year (October to December 2011).
UK domestic flight sales, which make up about 70 percent of Flybe’s revenue, fell 8 percent in the quarter, with sales last month ‘particularly disappointing.' The airline's Chief Executive Officer, Jim French, said Flybe responded to the weakening demand by seeking to maintain market share rather than increase fares.
Mr French said in a statement to the stock market that it was ‘the correct decision to protect the long-term potential of Flybe’ by securing its market position at the expense of fare increases. Flybe boosted its market share 2 percentage points in the quarter, he said, adding: ‘We have reduced our winter capacity in line with the market, and we continue to aggressively manage capacity and costs. We identified some time ago the need to lessen our dependence on the UK market and our move into Europe last year is progressing well.’
The airline expects ‘challenging market conditions’ to continue for the rest of its financial year, which runs to March 31. The airline's shares fell by 30 percent to just over 50 pence as of 08:30, valuing it at £40 million. The shares have fallen by over 80 percent since debuting on the Stock Exchange in December 2010.
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