Flybe Group plc (FLYB.L) announced an update on the progress of 'Delivery and Future Direction', the significant package of measures it has implemented in order to return Flybe UK, its UK based scheduled airline, to profitability and to provide a solid base for the future development of the business.
Flybe said it will deliver 30 million pounds of cost savings in 2013/14 in Phase 1 of its turnaround plan, versus its original target of 25 million pounds. These 30 million pounds of savings have been achieved in three key areas. They were achieved through Headcount and employment cost reductions, Outsourcing projects and Reduction in supplier costs.
The company targets additional annual savings of 25 million pounds in the phase 2 of turnaround plan.
The phase 2 of the turnaround plan includes three initiatives. They are a further reduction in staff costs of 6 million pounds in 2013/14, rising to 9 million pounds in 2014/15. This is driven by both further headcount reduction of about 80 staff (the vast majority of which are expected to be achieved by voluntary redundancy), and the creation of new starter terms and conditions which will effectively deliver an average lower cost base for new staff going forward; the delivery of substantial procurement savings following a radical overhaul and review of the supplier base undertaken during spring 2013. £4m of savings are expected in year 1 (2013/14), rising to 10 million pounds by 2014/15. More than 2 million pounds of the 4 million pounds savings sought in 2013/14 have already been secured; Various ancillary revenue and value repositioning initiatives are expected to deliver a further 4 million pounds improvement by 2014/15.
Flybe has agreed with Embraer the deferral of 16 new E175 aircraft due for delivery during 2014 and 2015. These aircraft will now not be delivered until 2017 to 2019. This deferral will lead to a reduction in pre-delivery payment commitments in winter 2013/14 of some 20 million pounds. Flybe also confirmed that it has sold two of its four surplus Q400 aircraft for a modest book profit.
Flybe expects to conclude various smaller agreements relating to surplus assets which are expected to generate further cash of approximately 5 million pounds, of which approximately 2.5 million pounds is currently at contract stage.
Flybe reconfirmed the unit operating profit targets announced on 23 January 2013.
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