Flybe has declared an end to the boom in domestic air travel and reports a deepening
drop in demand for British routes. The unreliability of demand has led to 2 profit
warnings this year. Flybe said winter bookings were down 1% compared with last
year, while last month they forecast a 1% increase. UK domestic routets are 70%
of Flybe’s passengers. The CAA says domestic air travel fell 20% over the past
4 years, as an over-supplied market bottomed out.
Exeter-based airline reports continuing drop in domestic demand as travellers
switch back to the railways
by Dan Milmo
Flybe has declared an end to the boom in domestic air travel as the regional
airline reported a deepening drop in demand for British routes.
The Exeter-based carrier runs domestic services which include Manchester to Norwich
and Aberdeen to Gatwick, but the fallibility of its business to UK demand has
been underlined by two profit warnings this year.
Flybe avoided another surprise on earnings on Wednesday as it published first-half
results, though an increase of pre-tax profits in the six months to 30 September
of £8.2m to £14.3m had been forecast to be significantly higher at one point this
year. Before the profit warnings, Flybe had been expecting to make £36m.
As well as the poor profits performance, the results contained a further admission
of weakness in the UK market. Flybe said winter bookings were down 1% compared
with last year, confirming a deterioration of sales on top of an already poor
outlook. Only last month Flybe had forecast a 1% increase in winter bookings.
It carries 7 million passengers a year.
At the time of its second profit warning Flybe said it was still gauging whether
the decline in UK travel – which accounts for seven out of 10 Flybe passengers – was due to a faltering economy or a fundamental move away from domestic routes.
Jim French, Flybe’s long-standing chairman and chief executive, said the fall
appeared to be deep-set. “This is a trend we have picked up across the industry
You have got to look at the industry, not just Flybe. I think we are seeing a
very, very flat situation.”
French added that, according to the Civil Aviation Authority, domestic air travel had fallen 20% over the past four
years, as an over-supplied market bottomed out. “It is a combination of the economic and business cutbacks over the period,
but I truthfully think that the market was over-supplied five to 10 years ago,” said French, pointing to a subsequent scaling down of domestic routes by Ryanair and easyJet, as well as the sale of British Airways’ domestic operations to Flybe in 2006.
Flybe has emphasised plans to expand in Europe, including the acquisition of
Finncomm Airlines in a joint venture with Finnish carrier Finnair.
According to the Civil Aviation Authority, UK airports handled 48.7 million [domestic,
not total link to CAA domestic passenger data ]passengers in 2007, but that number fell to 38 million last year – a fall of
22%. Rail appears to have been a major beneficiary and competitor. The Association
of Train Operating Companies said intercity rail journeys had risen by 19% since
2007, while on the top 10 domestic air routes, including London to Manchester,
Edinburgh and Glasgow, rail’s market share versus airlines has risen from 32%
to 44% since 2007. “In what is a highly competitive market, better services and
more cheap tickets are encouraging more and more people to choose rail to travel
between the UK’s main cities,” said ATOC.
Shares in Flybe rose 2p to 70p, despite the gloomier UK outlook. Analysts said
the airline’s tough action on costs – the cost of flying a single passenger rose
slightly – had calmed investors.
“Demand looks as weak as it did last month, but the saving grace is a tight grip
on costs, which are hardly growing at all,” said Douglas McNeill, analyst at Charles
Flybe to cut flights despite a surge in profits
10 Nov 2011
FLYBE, the Exeter-based airline that links Scotland with southern England and
western Europe, has reported soaring profits but said it will reduce capacity
by 6% during the winter amid falling demand.
Europe’s biggest regional airline said underlying profits rose 74% to £14.3 million
in the six months to September 30 after it was lifted by higher passenger numbers
in the UK and the acquisition of an airline in Finland.
The carrier said revenues at its UK business, including Scottish operations,
increased 7% to £329.1m in the half-year, although the figures were lifted by
weaker comparatives last year when planes were grounded by last year’s Icelandic
Seats flown were up 3% at 6.4 million in the first half, but down more than 1%
excluding the impact of the volcanic ash disruption.
The group, which flies from airports including Glasgow, Edinburgh, Birmingham,
Bristol, Cardiff, Doncaster and East Midlands, said revenues from forward ticket
sales for this winter are 1% lower than a year ago.
The carrier said it will reduce the number of seats flown over the winter by
6% compared to a year ago as it matches capacity with demand.
The fall in winter sales comes on the back of a recent warning that demand had
slowed in September, meaning half-year revenues would come in lower than was thought.
Douglas McNeill, an analyst at Charles Stanley, said: “Demand doesn’t appear
to have recovered much since the profit warning in early October, and that’s a
The plan to cut winter flights follows Ryanair’s decision to ground more planes
with passenger numbers falling by 10%.
Flybe said: “The short-term focus is to continue to protect profits and our market
leading position in the UK by matching seat capacity and demand.”