June 8, 2017 / 8:15 AM / 2 months ago

Airline Flybe to limit capacity to tackle challenging markets

FILE PHOTO: An airport worker examines a Flybe aircraft before it takes off from Liverpool John Lennon Airport in northern England, May 19 , 2016.Phil Noble/File Photo

(Reuters) - British regional airline Flybe Group set out plans to keep a lid on capacity as it contends with increasing competition and slowing growth in consumer demand.

The company said on Thursday that moves to slow its expansion had already provided some benefits and that it would cut capacity in the second half to leave it broadly flat for the year to March 2018.

Performance in the current financial year to June 5 had shown a 4.6 increase in passenger revenue per seat, Flybe said, adding that it had sold 45 percent of its capacity versus 44 percent at the same point last year.

"Forward booking trends point to unit revenue improvements that we view as encouraging," Liberum wrote in a client note, adding that headwinds for the company were starting to "moderate". It has a "Buy" recommendation on the stock.

Shares in Flybe, which connects British regional airports to London and other European cities, rose 4.5 percent to 34.61 pence by 0803 GMT. They are down by around a fifth so far this year.

The company reported an adjusted pretax loss of 6.7 million pounds for the year to March 31, against a 5.5 million pound profit the previous year.

Flybe said that IT costs were lower than expected at 4.8 million pounds, having warned in March that it expected a charge of between 5 million pounds and 10 million pounds related to a systems upgrade.

It has been contending with industry-wide challenges where larger European airlines have driven down fares by adding more seats to boost their market share in a period of lower oil prices.

Flybe's own difficulties had been compounded by its large exposure to the UK, where demand has experienced some turbulence after the vote to leave the European Union, and due to its own rapid capacity growth due to legacy commitments for additional aircraft.

Reporting by Esha Vaish in Bengaluru; Editing by David Goodman/Keith Weir

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