Profit warning hits Flybe founder in the pocket
Wednesday 11 January 2012
Jim French, Flybe's founder and chief executive, was nursing losses of more than £550,000 yesterday as the regional airline's second profit warning in three months sent the shares to a record low.
Mr French, who owns 5.34 per cent of the carrier, warned that the UK domestic market was "clearly challenging" as Flybe endured a particularly disappointing December. The shares plunged 20 per cent to 55p, wiping more than £8m off the airline's value.
Flybe is suffering from sluggish UK trading, which accounts for 70 per cent of its business. Its sales slump worsened from an underlying 6 per cent slide in the first half of the year to 8 per cent between October and December.
Mark Manduc, an analyst at Bank of America Merrill Lynch, said: "Assuming that Q3 trends continue into Q4 – and no material cost changes – we expect consensus for 2011-12 to move to a pre-tax loss of around £10m."
Mr French, whose airline operates 203 routes serving 18 countries, defended his decision to keep growing market share by sacrificing price increases to "protect the long-term potential of Flybe".
The company is selling off surplus aircraft and "aggressively" managing capacity and costs, as well as broadening its reach in moves such as its recent swoop for Finnish Commuter Airlines.
"We identified some time ago the need to lessen our dependence on the UK market and our move into Europe last year is progressing well," Mr French said.
Andrew Fitchie, an analyst at Investec, said: "Given the likely disappointment over a further downgrade and the remaining uncertain trading outlook, it is difficult to see the share performing in the short term."
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