British Regional demand takes off

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The Independent Online
SHARES IN British Regional Air Lines, the small European carrier, jumped by 14 per cent yesterday when the company reported surging demand for flights on its 50-seat jets.

With profits up by more than one-third, the shares began to recover the status they enjoyed before the collapse of small cap stocks in September last year, rising by 10p to 80p.

The full-year results are the first since British Regional came to market in June last year, opening at around 100p a share. Yesterday the board declared its first dividend of 0.88p.

Three months after listing, the group was rocked by the economic gloom caused by the rouble crisis, which hit transport stocks particularly hard.

Airlines also suffered under the impact of discount competition from EasyJet and Go!, the carrier owned by British Airways. Amid warnings of a softening travel market, the shares took two months to plummet from 100p to below 30p.

Terry Liddiard, the chief executive of British Regional, responded by stepping up a successful experiment with 50-seat jet aircraft.

This class of jets became profitable to fly only last year and have proved valuable to small airlines that could operate less popular routes without the strain of having to fill 100 seats per flight. The jets also hold much greater passenger appeal than turboprop aircraft.

Mr Liddiard has bought six more jets and plans to convert the entire fleet of 45 aircraft as soon as he can.

The airline is also moving into new routes, including some from Sheffield, the UK's fifth-largest City. Sheffield only recently gained its own airport.

Amid last year's economic travails, few investors drew a sharp enough distinction between discount carriers such as EasyJet and regional airlines such as British Regional.

Analysts point out that cut-throat fare cutting has little effect on British Regional because it is usually the sole carrier on its typical routes. Where it is not, it has shown in the past that it is perfectly capable of fighting off competition.

Forecasts for 1999 are already being upgraded from the pounds 6m profit that analysts had expected. At 80p, the shares are on a forward price/earnings ratio of around eight - a hefty discount to the market - and qualify as a long-term buy.