Flybe made a major corporate announcement to the London Stock Exchange yesterday morning.
As part of this announcement Flybe confirmed:
- Medium term operational profit targets for the Group.
- A revised strategy to focus on two key sectors of the market – its UK scheduled services business and the growing European contract flying market.
- Confirmation that there would be no change to its current route network and that consumers will still enjoy the same choice of routes and airports.
- A cost reduction plan for its UK business and associated support activities which targets cost reductions both internally and externally.
- As part of the proposed cost reduction plan for the UK business, it is expected c300 roles will be made redundant.
- The total annualised benefit of the cost reduction plan will reach £35m.
- A review of the potential outsourcing of various support functions.
- The establishment of a new Flybe Outsourcing Solutions business bringing together its contract flying, maintenance and training divisions across Europe into one customer offering.
Effect on UK employed Staff
As a result of the cost reduction plan announced, Flybe UK has commenced the consultation process which may lead to circa 300 proposed redundancies. This would equate to approximately 10% of its current UK based employees.
It is expected that the majority of the proposed redundancies will, following consultation, come from Flybe’s Exeter HQ, Manchester and Newcastle.
Commenting on the plan, Flybe’s Chief Executive 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% rise in Air Passenger Duty (APD) over the past six years and the consequent 20% decline in domestic traffic over the same period, we have to recalibrate the business. There is no escape from the £68M 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% 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%.
Concluding, Mr French said:
“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.”