Flybe warns of losses

Share in Flybe dropped by 8 per cent at the start of trading on Wednesday after the struggling UK regional airline said it expects to announce a small loss for the year to March 31, rather than the previously-anticipated small profit, it announced on Wednesday.

The airline is struggling with the effects of an over-optimistic order for 24 regional jets from Brazil’s Embraer placed at the time of its IPO in 2010.

The airline has swapped all but four of the jet orders for orders of smaller, used propeller-driven turboprop aircraft but still faces significantly increasing its capacity at a time of overcapacity and weak fares in the European air travel market.

The airline said it had trimmed its capacity growth in the current quarter to 10 per cent, from 12.7 per cent in the previous quarter. But load factors – the proportion of seats filled on each flight – had still fallen and revenue had grown more slowly than capacity, at 9.8 per cent.

The company said it also expected to incur extra costs and non-cash write-downs on a review of its IT systems, which would reduce profits by £5m to £10m for the year. Even before that effect, however, the airline warned that it expected to announce a small loss for the year, the airline said.

At pixel time, shares had recovered a little, but they were still down by over 5 per cent.