Budget airline Flybe reported losses of almost £20million after it expanded at a time when demand waned and was weighed down by the cost of upgrading its IT system.
The carrier, which is the largest independent regional airline in Europe, also said that the fall in the pound after Brexit made its loans priced in dollars more expensive to pay back.
Flybe fell to a £19.9million pre-tax loss in the year to the end of March, compared to a profit of £2.7million last year.
Into the red: Flybe posted losses of almost £20m after expanding during a period when demand waned.
This was despite a 13.4 per cent rise in sales to £707.4million, helped by rising revenues from its ‘white deals’, which are the flights operated by Flybe for other airlines.
Flybe said it increased capacity over the past year, but demand from passengers slowed, which hit profits.
Meanwhile, a £4.8billion writedown related to the upgrading of its IT system contributed to the losses, with the company expecting a further £6million in costs from cancelling existing contracts.
‘Despite the substantial progress in reducing the size of legacy fleet orders in 2015/16, Flybe has still seen significant capacity growth in a market where we witnessed slower growth in consumer demand,’ it said in a statement.
‘New routes and increased frequencies were targeted to cover marginal costs in the early years of operation, but do not contribute significantly to overall profitability. The capacity growth therefore had a negative effect on profitability.’
However Flybe said it will return six of its planes next year, which should result in capacity falling in the winter.
It also said that its digital transformation, which it just started, will help it attract more customers and boost revenues.
Chief executive Christine Ourmieres-Widener also said the new financial year has started well.
‘I am truly passionate about the airline industry and I see tremendous opportunities for Flybe to connect and engage with communities and to establish a reputation for excellence in serving our customers.’
‘We will be successful in delivering by continually focusing on our costs, increasing our knowledge about who our customers are and what makes them tick, achieving industry-leading operational excellence and implementing a great digital platform.’
Despite the losses, investors seemed to trust the company’s plans for the future, with shares in the company rising 2 per cent, or 0.75p higher at 33.75p around lunchtime.