Flybe Group plc

Q3 2016/17 TRADING STATEMENT

FLYBE delivered a solid quarter in tough trading conditions

Flybe continued to grow revenue in Q3 by deploying previously committed additional capacity, but increased capacity and tough trading conditions resulted in lower load factors. As we passed the anniversary of last year's tragic events in Paris and with the benefit of management actions, seat capacity growth started to slow, passenger yield increased and the decline in revenue per seat slowed:

·      13.5% growth in Passenger revenue in Q3, compared to 5.7% in H1 

·      12.7% growth in Q3 seat capacity slowed against 13.5% growth in H1

·      2.8% growth in passenger yield compared to 2.0% decrease in H1

·      1.7 ppts decline in load factor slowed against 4.3 ppts decline in H1

·      0.2% increase in passenger revenue per seat against 6.9% decrease in H1

As planned, four additional Q400 aircraft were added to the fleet during the quarter and the final four will be delivered in the last quarter, which will complete the NAC transaction and represents the peak in fleet size. We have now given notice to lessors that the next six end-of-lease aircraft will be returned in the second half of 2017/18.

UK regional connectivity will be increased with new routes between Edinburgh, Aberdeen and London Heathrow, which commence on 26^th March 2017. These routes will allow for connectivity with Flybe's codeshare partners, including Etihad, Singapore Airlines and Virgin Atlantic as well as interline connections with United Airlines, Delta, Qantas, TAP and Cathay Pacific.  More connectivity will be added over the coming months.

As previously announced Christine Ourmieres-Widener joined as our new CEO on 16^th January 2017.

Q4 2016/17 current trading

Uncertain customer confidence and poor weather have contributed to a slow start to this quarter. Trading data three weeks into Q4 was as follows:

·      11% increase in passenger revenue vs. prior year

·      13% increase in seat capacity vs. prior year

·      1% decrease in yield vs. prior year

·      38% of seats sold vs. 38% in the prior year

·      1% decrease in revenue per seat vs. prior year

Christine Ourmieres-Widener, Chief Executive Officer, said:

"I have only just started work as CEO at Flybe. However, everything I have seen so far confirms my excitement at the opportunity we have to become the best regional airline in Europe. There is much to be done, but we have the firm foundations needed to develop the business. My first priority is to look to rebuild passenger unit revenue and to challenge all our costs. This will be assisted by Flybe becoming an even more customer-focussed business as we achieve greater control over our fleet size."

Flybe UK KPIs

Cost per seat⁷, in constant currency and including the benefit of lower hedged fuel prices, reduced by 3.4%. Excluding fuel and in constant currency, cost per seat increased by 1.6% due largely to growth of our White Label business with SAS and increased delay and diversion costs resulting from the bad weather in December and higher EU261 charges.

Hedging

Flybe UK's current hedge books at 25^th January 2017 are summarised below 

Jet fuel

•             Q4 2016/17 - 99.2% hedged at USD 545.41 per tonne

•             H1 2017/18 - 91.0% hedged at USD 483.29 per tonne

•             H2 2017/18 - 71.4% hedged at USD 492.22 per tonne

US Dollar

•             Q4 2016/17 - 90.5% hedged at USD 1.4566

•             H1 2017/18 - 91.5% hedged at USD 1.4143

•             H2 2017/18 - 77.4% hedged at USD 1.4244

Carbon

•             Calendar year 2016 - 100% hedged at €4.47 per tonne

•             Calendar year 2017 - 100% hedged at €3.02 per tonne

Flybe UK's exposure to Euros has increased and is under review for hedging.

Notes:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Forward-looking statements:

Certain information included in these statements is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.

Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions and Flybe Group plc ("the Group") plans and objectives for future operations, including, without limitation, discussions of the Group's Business Plan, expected future revenues, financing plans and expected expenditures. All forward-looking statements in this report are based upon information known to the Group on the date of this Trading Statement. The Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

It is not reasonably possible to itemise all of the many factors and specific events that could cause the Group's forward-looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of the business. Further information on the primary risks of the business and the risk management process of the Group is given in the Annual Report and Accounts 2015/16; these documents are available on http://www.flybe.com/corporate/investors

¹   Seat capacity represents the actual number of seats flown.

²  Passengers are customers with an issued ticket where the ticket has charged a fare and/or a passenger surcharge and tax (if applicable) 

³  Load factor is sold seats (Flybe ticketed passengers on either Flybe operated scheduled services or hardblock routes operated by the codeshare partner) divided by scheduled available seats (seats available for passenger occupancy on scheduled services).

⁴  Passenger revenue represents total ticket and ancillary revenue (including unflown APD) less refunds plus revenue from hardblock codeshare arrangements. (In the Q3 2015/16 Trading Statement passenger revenue excluded hardblock revenue and unflown APD which when restated with the definition in note 3 would be £131.4m; and 11.4% YoY increase).

⁵  Passenger yield represents total passenger revenue (as defined in note 4) per passenger after the deduction of government taxes and levies. (When restated with the passenger revenue definition as per note 4, passenger yield for Q3 2015/16 would be £68.61; a 1.3% YoY increase).

⁶  Passenger revenue per seat is passenger revenue generated divided by scheduled available seats flown. (When restated with the passenger revenue definition as per note 4, passenger revenue per seat for Q3 2015/16 would be £47.29; a 1.2% YoY decrease).

⁷  Cost per seat includes all costs related to White Label operations (aircraft ownership cost, crew, maintenance, insurance and overhead), but not the flown seats associated with White Label operations.