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