Between soaring fuel prices, sky-high air passenger duty, steep staff costs, the eurozone crisis and muted customer demand, it’s a tough time to run a British airline. Flybe is in a particularly perilous position. It’s had a bumpy ride ever since it floated in 2010, releasing a raft of profit warnings and reporting a £4.3m hole in the balance sheet at the end of the last financial year. Their shares have lost 80% of their value since the IPO.
Losses have widened yet further in 2011-12. This is despite an increased UK market share – Flybe now controls 28% of domestic air traffic – and improved passenger numbers - some 7.3 million flew Flybe last year. Even with the much-vaunted joint venture with Finnair boosting Nordic revenues, with 25 routes in six countries, crippling overheads have sent profits into freefall.
Flybe chief executive Jim French said of the poor performance: ‘We remain in a challenging environment. However, Flybe today is a business of real scale and substance and one which has again demonstrated its resilience.’
Resilience is one thing, but with the eurozone crisis sapping consumer confidence and travel spends down across the board, Flybe needs a miracle – or significant drop in fuel prices to get back to profit. And in the current climate, the two are one and the same.
Flybe is not alone in facing this crisis, however: The International Air Transport Association (IATA) reckons that the European airline industry will post a record loss of $1.1bn this year. It's not surprising, therefore, that Flybe has taken the opportunity to attack the UK government's aviation policy, accusing it of 'incoherence'.
But, even if government takes its criticism under advisement, will it be too late for Flybe?