Flybe plummets

Flybe seems to be having a rather tough time at the moment. Following the grim fact of its second profit warning in 5 months, the market analysts don't have anything very encouraging to say. And if you think the words are bad, wait till you see the pictures...

All this will come as unwelcome news at Kent Irrational Airport, who like to present Flybe as a sign of great things to come. Unfortunately, it appears that the so-called "thin routes" that Flybe is operating out of Manston are the ones most susceptible to the downturn in demand.

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Shares in Flybe have slumped by more than 35% after the regional airline issued its second profit warning in five months.

Following in the wake of a sales warning by Germany's Lufthansa, the Exeter-based carrier said traffic on its British domestic routes had slumped. As a consequence, Flybe said, first-half revenues will miss targets. The airline, which operates routes such as Manchester to Norwich that are not profitable enough for the likes of Ryanair and easyJet but potentially lucrative for airlines with smaller planes, said it did not know whether the domestic downturn is part of a prolonged malaise.

"It is too early to determine whether the September slowdown in sales on our UK domestic routes is a short-term reaction to the turbulent macroeconomic environment, or whether this is a longer-term market adjustment," said the company. Investors appeared to bank on it being a prolonged slump, marking the shares down more than 37% to 63.5p at lunchtime in London, far below the flotation price of 295p last December.

Analysts at Royal Bank of Scotland said the slowdown indicated a fall in demand from Flybe's business customers, who sustain the so-called "thin routes", such as Manchester to Norwich, that cannot generate enough demand to support the use of 150-seat aircraft but can build a market for regular flights on smaller jets. RBS said: "The company says the volume slowdown has come in higher and medium fare categories, implying that it is business traffic rather than leisure traffic that is weakening."

Guardian 5th Oct 2011

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