Flybe to cut 500 jobs despite return to profit

FlyBe boss Saad Hammad: "We have excessive costs which we must deal with immediately"

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Flybe, the Exeter-based airline, has announced plans to cut 500 jobs across the business, despite reporting a return to profit.

Pre-tax profits were £13.8m for the six months to 30 September, compared with a loss of £1.6m a year earlier.

The company said its turnaround plan was on track to make £40m of savings this year and £45m in 2014-15.

But the pilot's union, Balpa, said it was "shocked" by the decision to cut jobs. Flybe employs 2,700 staff.

Analysis

No airline is finding it easy at the moment. They rarely do. Even the all-conquering Ryanair has announced two profit warnings in two months and pledged to be nicer to its customers.

But Flybe is different to all those big companies. It runs smaller aircraft and doesn't fill them up as much, making it harder to turn a profit. Plus, 74.3% of its flights are domestic, meaning that it often pays two lots of Air Passenger Duty, because you pay every time you take off from a UK airport. A flight abroad only pays once.

John Strickland, director of JLS consulting, told me that Flybe's future relies on making their own regional model work, competing with the trains for example, rather than going head-to-head with the big low-cost airlines. And step one is to start selling more seats on each aeroplane.

'Challenging times'

Flybe has been carrying out cost-cutting measures, but chief executive Saad Hammad, who joined the company in August, said more were now needed.

"It was clear to me that the existing Phase 1 and 2 cost savings were necessary but we simply needed to do more and to do it immediately," he said in a statement.

Mr Hammad told the BBC he could not say where the latest job losses would fall at this stage.

"We're consulting with unions and our staff," he said.

Flybe cut 490 jobs in 2012-13, with a further 100 going in the first half of 2013-14.

As part of the cost-cutting programme some routes could "possibly" go, Mr Hammad said. "These are challenging times," he added.

Group revenues rose to £351.1m in the six months, up from £340.8m in the same period last year.

The carrier now has 96 aircraft in its fleet, with 28 belonging to Flybe Finland, its joint venture with Finnair.

Passenger numbers increased 5.6% to 4.3 million in the first half of the year.

Investors welcomed Flybe's decision to carry out additional cost cuts, sending its shares up by 40.5% to 95.75p.

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