Flybe cut winter capacity in the face of weak demand and low fare competition from rival airlines and rail companies.
The regional airline’s revenue was also affected by weather-related and operational cancellations, as well as industrial action mainly by French air traffic controllers in the three months from January.
“The period has been characterised by weak demand in an uncertain consumer environment, together with price competition arising from overcapacity amongst airlines and sharpened price activity from rail operators,” the airline said in a trading statement today.
Flybe responded by taking further action on cost and reducing capacity.
Capacity growth was trimmed to 10% from a planned 12.7% yet the load factor fell by around 1.4 percentage points, against a 1.7 percentage point reduction in the previous quarter.
Passenger yield rose by 2.9%, resulting in estimated passenger revenue rising by 9.8% in the final quarter of the airline’s financial year, down from 13.5% in the previous three months.
The airline revealed plans for a “major upgrade” to its core systems to “significantly improve” the customer experience and allow greater e-commerce activities.
A full review of software and IT contracts is being conducted. This is expected to result in additional cost and non-cash write downs, which could impact profit by around £5 million to £10 million in the current financial year.
Excluding this, adjusted profit before tax for the year to March 31 is expected to be a small loss, Flybe said
Summer trading was described as being in line with expectations with a 3% increase in capacity.
The airline reported that 18% of capacity has been sold, in line with last year, with a 6% improvement in yield, helped by the timing of Easter, and an 11% increase in revenue.
Chief executive, Christine Ourmieres-Widener, said: “I continue to be very excited about the opportunities in Flybe, especially as we are now able for the first time to take control of our fleet size to reduce overcapacity.
“Flybe is increasingly a digitally enabled business, with 80% of bookings already being made via our website.
“To seize this opportunity, we must first rebuild some of our core systems and this is now starting. We shall continue to reduce costs, work with our partners to improve efficiency and stop unprofitable flying.
“I look forward to updating the market on my priorities for Flybe at our full year results announcement on June 8.”
Julie Palmer, partner at Begbies Traynor, said: “On the day that Article 50 has been triggered, it’s little surprise that cautious investors have reacted so strongly to British airline Flybe’s surprise profit warning, which sent shares in the company to a near six month low.
“With rising business and consumer uncertainty, a weaker pound and increased pricing pressure from rail operators all impacting the air travel market, not to mention industry-wide overcapacity causing revenues per seat to fall, the budget airline is clearly in for some serious turbulence ahead.”