Flybe cuts 300 jobs, blames Air Passenger Duty

23rd Jan 2013
Flybe cuts 300 jobs, blames Air Passenger Duty

UK-based regional airline Flybe has confirmed it will cut 300 jobs in an attempt to save £35 million annually.

The decision comes as the carrier seeks “to return the business to profitability and further exploit European potential”.

In an announcement to the London Stock Exchange this morning, Flybe said it would implement a revised strategy designed to focus on two key sectors of the market: its UK scheduled services business, and the growing European contract flying market.

However, the airline said there would be no changes to its current route network.

Commenting on the plan, Flybe chief executive, Jim French, said: “Today’s restructuring plan for the airline has clear, two year profit targets which we believe are deliverable and realistic.

“A new, slimline business model for UK scheduled services underpins a turnaround which I expect will deliver a £3.00 per seat profit target in the medium term.

“Today’s announcement of a turnaround strategy for the UK business is a clear indication that Flybe has a plan not only to address the challenges we face, but also one to exploit the opportunities available, particularly in Europe.”

Medium term operational profit targets for the group remain unaffected.
As part of plans to lower costs Flybe will carry out a review of the potential outsourcing of various support functions, while the airline will also establish a new Flybe Outsourcing Solutions business.

The new organisation will bring together its contract flying, maintenance and training divisions across Europe into one customer offering.

A summary of the announcement is provided at the end of this release.

“It is a matter of great regret that many valued and hard-working colleagues may leave the organisation and it was a decision I and the board have not taken lightly; it’s one we have tried to avoid and it is the first time in almost 30 years of business that we have had to take such action,” added French.

“However, faced with the brutal impact of a 160 per cent rise in Air Passenger Duty over the past six years and the consequent 20 per cent decline in domestic traffic over the same period, we have to recalibrate the business.

“There is no escape from the £68 million per annum APD tax burden which Flybe has to pay as a result of increases successive governments have levied on the industry.

“Flybe now pays more than 18 per cent of our ticket revenues to the government in APD, whilst other UK based carriers who operate a greater proportion of their business outside of the UK pay less than six per cent.”

Redundancies equate to approximately ten per cent of Flybe’s current UK based employees.

It is expected that the majority of the proposed redundancies will, following consultation, come from Flybe’s Exeter HQ, Manchester and Newcastle.

French said: “Recognising that any significant change to either the UK economy or the redistribution of APD is likely to be some way off, today’s announcement represents a clear and realistic plan with a measurable timescale and benchmarks, based upon significant restructuring and cost reduction to return Flybe to profitability.

“We are committed and focussed on the delivery of this plan, continuing to provide strong customer service to more than eight million passengers each year; to provide secure and long term employment for the remainder of our staff and to improve shareholder value,” he concluded.


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