October 17, 2018 / 6:22 AM / a year ago

Flybe sinks on profit warning from weaker demand, rising fuel

LONDON (Reuters) - Flybe FLYB.L issued a profit warning on Wednesday citing weakening demand, higher fuel costs and a weaker British pound, sending shares in the British regional airline lower.

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

Shares in Flybe, whose routes include London to Cornwall as well as connections between smaller UK cities and French regional cities, slumped 38 percent to 19.8 pence at 0917 GMT on Wednesday.

Flybe, which has in recent years tried to reduce its fleet size and cut costs, forecast a pretax loss of around 22 million pounds for the current 12 month period, substantially worse than a current company-supplied consensus for a loss of 3.5 million pounds.

However, a 10 million pound benefit from the ending of an onerous lease will help cushion the blow, putting the 78-aircraft strong company on track to post a loss of 12 million pounds over its financial year which runs to March 31 2019.

Flybe said that in recent weeks, consumer demand for travel in Britain and Europe had weakened, and that would combine with higher fuel prices and weaker sterling to drag on its performance in the second half period.

The winter season is always tougher for airlines as fewer Europeans take flights to go on holiday, and that comes at a time when the oil price is hovering at a near four-year high.

Flybe will announce half-year results on Nov. 14th, when it is expected to detail further cost cutting plans.

“Stronger cost discipline is starting to have a positive impact across the business, but we aim to do more in the coming months, particularly against the headwinds of currency and fuel costs,” Flybe CEO Christine Ourmieres-Widener said in a statement.

Liberum analysts cut their target price on the shares, which have halved in value over the last three months, to 33 pence from 43 pence but kept their “hold” rating on the stock.

“The opportunities for self-help improvements remain, but they are being more than offset by the challenging external environment,” Liberum said.

($1 = 0.7589 pounds)

Reporting by Sarah Young; editing by Costas Pitas and Alexandra Hudson

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