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UPDATE 2-Flybe swings to profit; shares slip on Lufthansa warning
June 11, 2014 / 7:16 AM / in 3 years

UPDATE 2-Flybe swings to profit; shares slip on Lufthansa warning

* Full-year pretax profit 8.1 mln stg vs est 6.4 mln stg

* Revenue 620.5 mln stg vs est 623.9 mln stg

* Shares fall as much as 7 pct after Lufthansa warning (Adds CEO, analyst comments, details; updates share movement)

By Esha Vaish

June 11 (Reuters) - British carrier Flybe Group Plc posted its first pretax profit in four years, beating analyst estimates, as it exited unprofitable routes and grounded surplus aircraft.

But the company’s shares, which rose about 4 percent in early trading, reversed course to drop as much as 7 percent on Wednesday after Lufthansa AG warned that prices on European routes were being pressured by Gulf airlines.

European airlines are being squeezed by a combination of cost-conscious flyers, soaring fuel costs and higher airport charges.

Robin Byde, an analyst at Cantor Fitzgerald Europe, said there may be some downward revisions of forecasts for Flybe after Lufthansa’s warning.

Analysts on average expect Flybe to report an adjusted pretax profit of 20.02 million pounds ($33.6 million) in the year ended March 2015, according to Thomson Reuters I/B/E/S.

Flybe, whose investors include billionaire financier George Soros, launched a turnaround programme last January, cutting costs by giving up airport slots, slashing jobs, exiting unprofitable flight routes, and grounding surplus aircraft.

The company is also revamping its image by repainting its planes purple from white, updating interiors and introducing new staff uniforms.

The budget carrier swung to a pretax profit of 8.1 million pounds in the year ended March 31. The airline, which had not made a profit since 2011, lost 41.1 million pounds in the year to March 2013.

Revenue inched up 1 percent to 620.5 million pounds.

Analysts on average had expected a pretax profit of 6.4 million pounds, on revenue of 623.9 million pounds.

Flybe’s passenger revenue per seat increased 1.8 percent to 49.70 pounds, while its load factor rose 5.4 percentage points to 69.5 percent.

The company’s move to cut fares boosted volumes without diluting revenue per seat or total passenger revenue, Gerald Khoo of brokerage Liberum said in a note. Khoo lifted his price target on the stock to 190 pence from 175 pence.

Flybe shares were trading at 134 pence at 1120 GMT.

Flybe, which serves 35 UK airports, said on Wednesday its decision last year to stop flying unprofitable routes would impact revenue and profit in the current financial year.

“Our planned capacity reduction for this summer is about 16 percent, so first-half total revenue will reduce, but nowhere near 16 percent,” Chief Executive Saad Hammad, a former executive at larger rival easyJet, told Reuters.

Hammad said Flybe’s cost-cutting would continue to drive improved load factors and revenue.

The company said the general economic outlook in its most important market, the UK, has improved. ($1 = 0.5956 British Pounds) (Writing by Karen Rebelo in Bangalore; Editing by Gopakumar Warrier and Ted Kerr)

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