Flybe nosedives after profit warning

Shares in Flybe tanked on Wednesday after the budget airline warned that full-year profit would take a hit from higher-than-expected aircraft maintenance costs in the first half.

The company said the higher costs reflect the drive to further improve the reliability of its aircraft, particularly the Bombardier Q400 turboprop, with improvements already being seen. A full review of the maintenance strategy has now been launched with the aim of improving aircraft performance and costs.

As a result, adjusted pre-tax profit is now expected to be come in between £5m and £10m for the first half of this financial year, versus £15.9m in the same period a year ago. This is after charging the additional IT costs, as previously announced, of around £6m in the first half of this year related to the development of a new digital platform.

Chief executive Christine Ourmieres-Widener said: “While half-year profits are lower than expected, I am confident that we are still on a clear sustainable path to profitability in line with our stated plan. The increased maintenance costs are disappointing, but we are already addressing these in the second half and remain focused on improving our cost base and reliability performance.

“Our Sustainable Business Improvement Plan is delivering benefits with the fleet size now reducing, and consequently both yield and load factors are increasing. The net debt, as expected, remains broadly in line with year ended 31 March 2017."

Neil Wilson, senior market analyst at ETX Capital, said: “Combined with previously stated write-downs for IT this could mean another full-year pre-tax loss. It may have gained some market share from Ryanair’s troubles but revenue growth is not really what matters at the moment.”

Meanwhile, Numis said it now expects the airline to report a loss per share of 4.7p in FY18 and 1p in FY19, compared to its previous expectations of earnings per share of 2.1p and 4.4p, respectively.

At 0915 BST, the shares were down 12% to 38.70p.