A trading update from regional airline Flybe (FLYB) has been welcomed by the markets which have been watching the Exeter-based carrier's self-help strategy with interest. Shares in the £306 million cap are up 4% at 146.8p on the announcement. Over the past year, they've ascended 217% as the group takes tough decisions needed to transform its fortunes.

Despite the large gains, it's worth bearing in mind that Flybe's share price is still some 18% lower than three years ago and considerably below its 295p flotation price in December 2010.

We highlighted the stock earlier this year as a potential takeover target.



The 4 April trading update, ahead of full-year results on 11 June, reveal 6% growth in passenger volumes to 1.6 million in the fourth quarter despite a 4% reduction in capacity. Load factors increased to 70% in the period which Flybe attributes to its competitive pricing strategy. Higher passenger volumes more than offset lower yields, leading to a 4% increase in passenger revenue per seat to £49.80.

Forward sales are also looking encouraging with 20% of Summer 2014 seat capacity sold at 31 March 2014, compared with 17% at 31 March 2013.

Encouragingly, the eight new routes launched in February from Birmingham, have exceeded expectations with 30% of Summer 2014 seat capacity already sold. Flybe now offers 126 Summer routes and 2,600 flights a week across the UK and Europe.

While the figures continue to improve, Flybe's Turnaround Plan (unveiled in January and May 2013) and its Immediate Actions initiative (launched in November 2013) are ticking over nicely and delivery of phases 1 and 2 of these plans remains on track. In the 2013/14 year, a total of £47 million was delivered in savings with a further £71 million expected to be delivered in cost-cutting in the 2014/2015 year.

When the group reports in June investors will be keen to see how Flybe's brand relaunch, which was unveiled this month, is playing with customers. Initatives include a new strapline ('The fastest way from A to Flybe') as well as a new marketing and TV advertising campaign and what the airline is describing as a 'a world-first 60:60 On Time Guarantee.' This promises passengers that if a flight arrives more than 60 minutes late at its destination due to a delay within Flybe's control, they will qualify for a £60 voucher towards their next flight if they book it within 60 days.

Issue Date: 04 Apr 2014