Flybe Ends Gatwick Operations

May 24, 2013

Struggling airline Flybe Group will quit its main London hub at Gatwick airport and has pushed back the delivery of 16 new aircraft to help it return to profitability.

Europe's largest regional airline also said it had axed 590 jobs, or 22 per cent of its UK workforce, despite saying in January it would cut only 300 jobs when it unveiled a cost-cutting plan designed to end a two-year run of losses at the pre-tax level.

Flybe floated its shares on the London Stock Exchange at the end of 2010 and has since suffered from soaring fuel costs, falling passenger numbers and higher airport charges, especially in London.

The company, which counts British Airways parent IAG and billionaire investor George Soros among its largest shareholders, said yesterday the measures would save it £30m in costs in 2013/14, £5m ahead of its previous target, with more than half coming from the job cuts.

Flybe will exit Gatwick in March 2014, after agreeing a deal to sell its 25 take-off and landing slots at London's second-largest airport to easyJet for £20m.

"No business can swallow cost increases of more than 100 per cent over five years and Flybe simply cannot bear such punitive rises," Flybe chief executive and chairman Jim French said.

Flybe said it had also pushed back the delivery of 16 Embraer E175 aircraft to between 2017 and 2019, which would reduce pre-delivery payment charges due this year by £20m.

The aircraft were previously due to arrive in 2014 and 2015.

Since Flybe's 295p-per-share float, its shares have fallen 80 per cent, cutting the company's market value to £43m from £215m at launch.

"Flybe is exposed to the regional UK market which is not seeing the same growth as London is," said analyst Alexia Dogani at brokerage Liberium. "London airports have become more expensive for small regional airlines to operate (from)... and therefore Flybe has not been able to attract as many passengers for its routes."

It is not the only smaller airline to have suffered. Last year, loss-making Spanair and Hungarian flag-carrier Malev ceased operations, leaving gaps in the market that larger low-cost carriers like easyJet have been quick to exploit.

European carriers including Germany's Lufthansa AG, Franco-Dutch Air France-KLM and Spain's Iberia have also cut thousands of jobs over the last year and reined in capacity growth.

Flybe flies to Belfast, Glasgow, Edinburgh and the Isle of Man from Gatwick. Selling its Gatwick slots would substantially reduce its London operations to just the few flights it runs out of Luton airport.

In April the carrier forecast an underlying loss for the year to the end of March. It said in January it expected to break even in the fiscal year ending March 2014.

Copyright 2013 Johnston Press PlcAll Rights Reserved