(Adds analyst comments, background, share movement)
By Esha Vaish and Noor Zainab Hussain
Jan 26 (Reuters) - Shares in Flybe Group slumpedmore than 20 percent on Monday after the British budget airlinesaid it would break even before tax in its financial year endingin March 2015 after a fall in third-quarter passenger revenue.
The embattled carrier posted its first pretax profit in fouryears in the year ending March 2014, helped by brutal cost cutsthat involved giving up airport slots, slashing jobs, exitingunprofitable flight routes and grounding surplus fleet.
But Flybe has since been on rocky ground, swinging back to aloss in the first half of its current fiscal year due to one-offcosts and a charge related to its exit from its Finland jointventure.
The full-year forecast on Monday followed a 3.8 percent dropin passenger revenue in the final three months of 2014 to 126.8million pounds on the back of competition on some new LondonCity airport routes.
"We believe that this competitive pressure will extend theperiod of time that these routes take to reach maturity anddeliver the full contribution we expect," Flybe said.
The airline said excluding costs relating to groundedEmbraer E195 aircrafts and the impact of some loan revaluations,it now expected to break even before tax this fiscal year.
Liberum analyst Gerald Khoo said this forecast implied a 9million pound cut to profit estimates. He cut his target priceon the stock to 140 pence from 180 pence, but kept his "buy"rating.
At 0949 GMT, Flybe shares were down 22 percent at 70.2 penceafter touching 67 pence, the lowest since Nov. 8 2013.
Liberum's Khoo attributed Flybe's troubles to new routesfrom London City taking longer to mature, and adjustmentsrelating to the company retaining nine surplus Embraer E-195aircraft for longer than hoped.
While European routes have seen increased competition,forcing players to undercut each other on pricing, the fall incrude oil prices and thus lower fuel costs has come assome reprieve.
Regional airlines have stepped up hedging as they look tolock in huge savings, betting that a slide in crude oil tosix-year lows may peter out near $40 a barrel.
Flybe said it would not see significant benefits from lowerfuel prices until 2016/17, due to its hedging strategy.
(Editing by David Clarke)
