Oil prices hit airlines as Flybe drops most since 2011

By BLOOMBERG

LONDON • Rising oil prices that have already wiped out two European airlines since September have claimed another victim: Britain’s biggest carrier on domestic routes lost more than one-third of its value yesterday as an escalating fuel bill coincides with weaker demand.

Shares of Flybe Group plc dropped as much as 38% as the Exeter, England-based company said “softening” second half sales would lead full-year profit to fall short of analysts’ estimates.

The drop was the second biggest since Flybe floated in 2010, with the stock’s price of 20.9 pence (RM1.15) as of 9:16am local time yesterday, more than 90% below its debut level.

Flybe has sought to carve out a model focused on secondary cities largely ignored by network and low-cost operators, becoming Europe’s biggest airline using planes with 100 seats or less.

While potentially valuable, the smaller planes generate lower operating margins, leaving the company particularly vulnerable to fluctuations in costs and demand. Flybe has culled routes and dropped regional jets in favour of less thirsty turboprops after crude hit its highest levels in four years and airports operator Stobart Group Ltd dropped plans for a takeover.

Other carriers have already succumbed to the rising oil price, with Scandinavian leisure carrier Primera Air collapsing on Oct 1 and German charter specialist Azur Air GmbH grounded. That’s after Air Berlin plc and Monarch Airlines failed in 2017.