Flybe has announced a major cost reduction plan, including the loss of around 300 staff.
The carrier made the announcement to the London Stock Exchange this morning, and says it is part of a “two year roadmap to return the business to profitability and further exploit European potential”.
The plans involve cutting costs by around £35 million, with proposals to cut around 10 per cent of UK based employees, equating to around 300 staff. A review will also be carried out into the possible outsourcing of “various support functions”.
Flybe stressed that there will be no change to its current route network, adding that “consumers will still enjoy the same choice of routes and airports”.
The carrier says it will focus on two key sectors of the market - its UK scheduled services business, and “the growing European contract flying market”. In 2011 the carrier formed Flybe Nordic, a joint venture airline with Finnair serving Nordic and Baltic countries (see online news July 1, 2011).
Announcing the news CEO Jim French said:
“Today’s restructuring plan for the airline has clear, two year profit targets which we believe are deliverable and realistic. A new, slimline business model for UK scheduled services underpins a turnaround which I expect will deliver a £3.00 per seat profit target in the medium term.
“Today’s announcement of a turnaround strategy for the UK business is a clear indication that Flybe has a plan not only to address the challenges we face, but also one to exploit the opportunities available, particularly in Europe.
“It is a matter of great regret that many valued and hard-working colleagues may leave the organisation and it was a decision I and the Board 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.
“However, faced with the brutal impact of a 160 per cent rise in Air Passenger Duty (APD) over the past six years and the consequent 20 per cent decline in domestic traffic over the same period, we have to recalibrate the business.
“There is no escape from the £68 million per annum APD tax burden which Flybe has to pay as a result of increases successive governments have levied on the industry. Flybe now pays more than 18 per cent of our ticket revenues to the government in APD, whilst other UK based carriers who operate a greater proportion of their business outside of the UK pay less than 6 per cent.
“Recognising that any significant change to either the UK Economy or the redistribution of APD is likely to be some way off, today’s announcement represents a clear and realistic plan with a measurable timescale and benchmarks, based upon significant restructuring and cost reduction to return Flybe to profitability.
"We are committed and focussed on the delivery of this plan, continuing to provide strong customer service to more than 8 million passengers each year; to provide secure and long term employment for the remainder of our staff and to improve shareholder value.”
Flybe dropped a series of routes last year, including Southampton-Frankfurt, Manchester-Brussels, Gatwick-Aberdeen and Exeter-Leeds, but has also announced new routes to Barcelona from Southampton and Exeter for this summer.
For more information visit flybe.com.
Report by Mark Caswell
