Flybe has issued a profit warning which it has attributed to a drop in demand for domestic flights in the UK, according to reports.

Flybe shares have plummeted more than 20% after it revealed its 3Q revenues in 2011 would be lower than it had expected as the UK air market continues to deteriorate.

Flybe revealed that demand in the UK domestic market fell by 8% for 3Q compared to 6% the previous year. It revealed that in particular, December had created “a significant shortfall” against its expectations.

UK domestic air travel represents about 70 per cent of the regional airline’s activity from UK airports.

The carrier said in a statement “Flybe UK’s passenger numbers and revenues for Q3 2011/12 were broadly in line with Q3 2010/11, despite the continued decline in the UK domestic market.

“However, this does represent a significant shortfall against our revenue expectations for Q3 2011/12.

“It is not expected that the Q3 2011/12 shortfall in revenue will be recovered during the remainder of the 2011/12 financial year.

“Based on latest sales trends, we believe that challenging market conditions will continue for the rest of the financial year to 31 March 2012.”
Chairman and chief executive Jim French said: “The UK domestic market is clearly challenging.

“Under such circumstances, notwithstanding the shortfall against our revenue expectations, I believe that maintaining volumes and growing market share at the expense of planned yield increases was the correct decision to protect the long-term potential of Flybe.

“We have disposed of surplus aircraft this year and reduced our winter capacity in line with the market, and we continue to aggressively manage capacity and costs.

“We identified some time ago the need to lessen our dependence on the UK market and our move into Europe last year is progressing well.

“With a strong balance sheet, UK market leadership, a number of other opportunities under discussion and $500 million of aircraft financing secured - covering all planned deliveries to July 2014 - we believe that our overall strategy is intact and that Flybe has a strong future in the medium and long term.”