Flybe axes 300 jobs to slash costs

Around 300 jobs are to be axed at regional airline Flybe as it battles to slash costs by £35 million to stem losses.

The Exeter-based carrier announced plans to cut around 10% of its 3,000-strong UK workforce and is considering outsourcing further support functions, including ground handling and onboard catering.

Support and production roles such as human resources and IT will be affected by the jobs cull, while around a fifth of its management team is being cut.

The group, which flies from airports including Bristol, Cardiff, Doncaster, Edinburgh and East Midlands, is also putting its network of 13 UK bases under review and will give further details in the summer.

Flybe, which outsourced its call centre last month in a move impacting 55 jobs, slumped into the red by £1.3 million in the six months to September 30 against profits of £14.3 million a year earlier.

It blamed the loss on high fuel costs and falling numbers of fliers.

Quarterly figures today revealed a 1.7% improvement in the number of passengers flown to 1.8 million in the three months to December 31, but passenger revenues fell 1.2% to £136.9 million and costs increased by an equivalent of 0.8% per seat.

Andrew Knuckey, chief financial officer of Flybe, said wider economic pressures and the impact of air passenger duty hikes in recent years meant it "had no choice" but to cut jobs to bring costs down.

The overhaul will reduce Flybe's three divisions to two, comprising Flybe UK and a new outsourced services function.

As well as the jobs impact, Flybe will also cut costs with suppliers such as airports and maintenance providers, roll out fuel efficiency programmes and introduce further automation at check-ins.

The group's aircraft fleet will be reduced by seven in addition to the overhead cost-cutting.

Jim French, chairman and chief executive of Flybe, said: "I am extremely disappointed that many valued and hard-working colleagues may have to leave the organisation.

"It's a decision the board and I have not taken lightly; it's one we have tried to avoid and it is the first time in almost 30 years of business that we have had to take such action."

But he added the restructure delivers a "clear and realistic plan to return Flybe to profitability".

Flybe warned in November that it was facing the toughest conditions in its history after seeing fuel costs rise by nearly a quarter, while demand was being stifled by air passenger duty hikes.

The group is hit particularly hard by passenger duty, as it is charged both ways on UK domestic flights and accounts for 18% of its ticket revenues.

It said services had been resilient amid this month's snow and adverse weather, with around 4% of 500 flights a day cancelled at the height of the disruption.

Flybe added that passenger sales for the three months to the end of March were 2% ahead of last year, while sales for the summer showed a 5% rise.

But the group said the overall outlook had failed to improve since a difficult start to its financial year.

Flybe has been increasingly setting its sights on continental Europe to offset the UK woes and recently formed a joint venture with Finland's flag carrier Finnair.

Its European operation now accounts for 40% of business and the group is looking to make further tie-ups and acquisitions.

The group has issued a series of profits warnings in recent years, causing its shares to slump in value from about 325p at the time of its flotation at the end of 2010 to 48.5p today.

PA