Flybe might be Europe's largest regional airline, but size offers little protection when people stop flying and when you rely too heavily on one market. A second warning in three months has carved a quarter off the share price and Flybe is now the clear sell in a difficult sector.
Flybe's entry into continental Europe helped boost third-quarter revenue by 20 per cent, but the UK is still responsible for 70 per cent of its business and conditions in the domestic market have continued to deteriorate. An 8 per cent drop in underlying sales over the three months represents a "significant shortfall" in expectations, and there’s no way the carrier will make that up with just a few months of the financial year left, given it admits the latest sales trends are bleak. December was particularly bad.
Andrew Fitchie at Investec has torn up his forecast for a £6.4m profit in the year to 31 March 2012 in favour of an £8.5m loss, and he thinks the carrier will leak another £1.3m in 2013 (£17.1m before).
"Given the likely disappointment over a further downgrade and the remaining uncertain trading outlook, it is difficult to see the share performing in the short term," says Mr Fitchie.
Like easyJet and Ryanair, Flybe has cut capacity over the winter in response to weak demand and high fuel prices, but, unlike its much larger peers, the carrier has been less successful at passing on price increases to offset rising costs. Nor does it have their popular routes, higher operating margins and history of special dividends.
