Flybe makes progress with its turnaround in 3QFY2014, but big challenges remain

Flybe's trading statement for 3QFY2014, while not giving details of costs and profitability, suggests it is making good progress with its restructuring programme. In the UK airline, revenues per seat grew by 2.3% and costs per seat (excluding fuel and restructuring costs) fell by 5.2%. In addition, its confidence appears to be growing that it will achieve the cost reduction targets in its Turnaround Plan.

In a sign that Flybe's new CEO Saad Hammad is not content simply to cut, Flybe has recently announced seven new international routes from Birmingham. It has no competitors on four of these routes, but faces LCC competitors on three. Even after cost reduction, Flybe will still have a significant disadvantage in unit costs against the LCCs.

Its challenges involve attempting to build on its strong market share in the UK regional domestic market to expand in international markets without confronting the LCCs too frequently, while seeking new opportunities across Europe for contract flying on behalf of other airlines and continuing to take costs out of the business.