Airline Flybe quits London's Gatwick Airport

The carrier currently runs about 340 domestice flights a week from the airport

Struggling regional airline Flybe is quitting Gatwick Airport by selling its runway space there to budget rival easyJet for £20 million.

The Exeter-based carrier, which currently flies about 340 flights a week between Gatwick and destinations around the UK, said its pilots have agreed a 5% pay cut, while it will also cut more jobs.

It recently warned annual losses for the year to March will be deeper than feared at around £23 million as it is squeezed by higher fuel costs and the tough economy.

Flybe will cease flights from Gatwick next March, where it currently flies more than half a million passengers to destinations around the UK. EasyJet today said it will review the routes, but there is no obligation for it to maintain them.

Flybe is selling the 25 pairs of take-off and landing slots to raise vital funds after struggling badly during the downturn. It blamed higher taxes and “discriminatory pricing” at Gatwick, owed by private equity and sovereign wealth funds, for its decision to quit the airport.

Flybe flies to and from Newcastle, Jersey, the Isle of Man, Inverness, Guernsey, Belfast and Newquay from Gatwick. It flew 550,000 passengers from the airport in its latest financial year.

It said there will be no change to the routes' frequency or timings while it still operates the slots.

EasyJet's purchase will bolster its presence to almost half the slots at Gatwick, its biggest base, where it already has more than 41% of runway space. The airline has reported surging growth despite the squeeze on consumer income as it capitalises on rivals' woes.

Flybe also revealed another 80 redundancies, on top of almost 600 staff - or 22% of its workforce - who have been axed so far as part of plans to save at least £35 million a year.

The airline has delayed the purchase of 16 new aircraft from Embraer, saving £20 million in payments this year.

Its 650 pilots, most of whom are in the British Airline Pilots Association, have agreed in principle to take a 5% salary cut in return for extra time off, it added.

Flybe said: “The decision to sell the slots follows a discriminatory pricing regime applied by the airport's owners to the operators of smaller, regional aircraft which, in Flybe's case, has resulted in a 102% increase in charges over the last five years.

“It is the view of the board that the increase in charges, combined with the penalistic levels of air passenger duty imposed on UK domestic airlines by successive governments, have resulted in Flybe's services to and from Gatwick becoming unsustainable in the long term.”

A spokesman for easyJet said: “They intend to review the routes as they would normally. They already serve some of the routes but they are not going to automatically keep flying them.

“EasyJet is keen to provide service wherever passengers want to fly and there's no reason easyJet won't fly these routes. It's just not making any commitment at this time.”

He said there is already some overlap, with easyJet flying to the Isle of Man and Inverness from Gatwick.

The runway slot sale needs approval from Flybe shareholders, and it will receive payment from easyJet in tranches.

Analysts at Espirito Santo said: “We see this enhancing significantly the chances of the group executing a successful turnaround without recourse to additional external funding.”