Flybe Group Regulatory News (FLYB)

Flybe Group plc

("Flybe" or "the Group")

Interim Management Statement

Flybe, Europe's largest regional airline, today announces its Interim Management Statement for the period to 9 February 2012, incorporating the third quarter ended 31 December 2011 ('Q3 2011/12').

Flybe will announce preliminary results for the year ended 31 March 2012 on Monday 11 June 2012.

Financial highlights1:

Group

·; Total revenue under management2 showed an increase of 18.6% to £165.5 million, driven by Flybe's entry into Continental Europe through Flybe Finland, the joint venture with Finnair.

·; Scheduled seats flown for the Group (including Flybe Finland) were 3.0 million, up by 9.8% from 2.8 million in Q3 2010/11. (Adjusting for the severe weather disruption in the UK in Q3 2010/11, the YOY increase was 3.4%).

·; Net assets at 31 December 2011 were £102.8 million, and total cash was £61.5 million.

Flybe UK

·; Flybe UK generated total revenues of £133.7 million in Q3 2011/12, down 0.3% on Q3 2010/11.

·; Seats flown were 2.75 million, a decrease of 0.3%. (Adjusting for the severe weather disruption in Q3 2010/11, the YOY decrease was 6.0%).

·; Passenger numbers and load factor were comparable to Q3 2010/11 at 1.7 million and 61.7% respectively, despite a UK domestic market which continues to be challenging.

·; Passenger yield up by 0.1% to £76.90.

·; Passenger revenue per seat up 0.2% to 47.41.

·; Fuel hedged at $987 per tonne for 87% of forecast burn in Q4 2011/12, and 60% hedged for H1 12/13 at $1,009 per tonne.

Flybe Europe

·; Flybe Finland generated total revenues of £25.8 million in Q3 2011/12, comprising passenger revenue of £8.3 million and other revenue of £17.5 million (primarily contract flying for Finnair).

Flybe Aviation Support

·; Flybe's MRO facility produced 161k man hours in Q3 2011/12 (of which 101k man hours were for third party customers), an increase of 44.5% on Q3 2010/11.

Strategic and operational highlights:

·; Rebranding of the joint venture operations in Finland is complete and Flybe Finland is now operating its new scheduled route network.

·; Secured committed financing with BNDES of approximately $500 million for up to 20 new Embraer E175 regional jet aircraft scheduled for delivery between November 2011 and July 2014.

·; Took delivery of the first four Embraer E175 regional jets (from our firm order of 35 placed in July 2010).

·; Sale of the final two Q400 aircraft scheduled for disposal to Rand Merchant Bank ('RMB') completed, taking thetotal number of Q400 aircraft sold as part of this agreement to seven, as previously announced.

·; Maintained leadership in UK regional and domestic markets:

o market share of Flybe brand in the UK regional market (excluding London) in the twelve months to 31 December 2011 was 50.5%, up from 48.0% in the same period last year; and

o total domestic market share of the Flybe brand in the same period was 27.9%, up from 27.0%.

·; Punctuality

o Flybe UK - 84.8% on-time flights in Q3 2011/12 against 77.9% in Q3 2010/11 (which was affected by severe weather conditions from late November to the end of December 2010).

o Flybe Finland - 82.6% on-time flights in Q3 2011/12.

Commenting on the results, Jim French CBE, Flybe's Chairman and Chief Executive Officer said:

"Flybe UK continues to focus on a number of initiatives to increase revenue per seat, further reduce costs and ensure capacity is optimally matched to demand. The business has grown its market share and maintained its leadership position in the UK regional and domestic markets.

"The development of Flybe Finland, our new joint venture with Finnair, continues to progress well. This includes the expansion of scheduled services into Sweden and Denmark, as part of our plan to develop the business into the leading Regional carrier in Northern Europe.

"In our Aviation Support division, the MRO business has seen increased demand for aircraft maintenance from European regional airlines and the Training Academy will benefit from the commissioning of our second flight simulator in March.

"Although we expect market conditions to remain challenging, we have a robust and flexible business model and clear and achievable growth plans. We remain confident about Flybe's long term future."

There will be a conference call for analysts at 8:00am this morning. For dial in details please contact Helen Tarbet, helen.tarbet@collegehill.com.

10 February 2012

Enquiries:

1 All figures are compared to the equivalent figures for the three months to 31 December 2010.

2Includes revenue from Flybe Finland Oy, a joint venture between Flybe (60%) and Finnair (40%) - Flybe has management and operational responsibility for Flybe Finland.

Group KPIs (including Flybe Finland)

Flybe UK

Flybe UK comprises Flybe's UK domestic and UK to European airline operations.

KPIs

Revenue

Seats flown in Q3 2011/12 were 2.75 million, broadly in line with Q3 2010/11. Passenger numbers in Q3 2011/12 were 1.69 million, which was also comparable to the same period in 2010/11. As such, the load factor remained relatively unchanged at 61.7%.

Passenger revenues remained broadly in line with prior year:

·; ticket revenue reduced by 0.7% to £106.7 million, with ticket yield per passenger of £63.02 and;

·; ancillary revenue increased by 3.1% to £23.5 million, with ancillary yield per passenger growing by 3.2% to £13.88.

Passenger revenue per seat increased by 0.2% to £47.41.

Costs

Flybe UK's costs per seat for the quarter to 31 December 2011 increased by 3.7%. Excluding fuel, costs per seat increased by 1.2%.

Hedging

The Group's current hedge books3 are summarised below (all hedges are forward swaps).

Jet fuel

·; Q4 2011/12 - 87% hedged at $987 per tonne

·; H1 2012/13 - 60% hedged at $1,009 per tonne

·; H2 2012/13 - 14% hedged at $1,001 per tonne

US Dollar

·; Q4 2011/12 - 80% hedged at $1.60

·; H1 2012/13 - 60% hedged at $1.62

·; H2 2012/13 - 49% hedged at $1.58

Flybe currently has a broadly neutral position in Euro income and expenditure.

Market share

Flybe maintained its leadership position in the UK regional and domestic markets:

·; market share of the Flybe brand in the UK regional market (excluding London) in the twelve months to 31 December 2011 was 50.5%, up from 48.0% in the same period last year; and

·; total domestic market share of the Flybe brand in the same period was 27.9%, up from 27.0%.

Operational performance

84.8% of arrivals were on time in Q3 2011/12, compared with the 77.9% experienced in Q3 2010/11 which was affected by the severe adverse weather conditions from late November to the end of December 2010.

Flybe Europe

The Flybe Europe division was established in August 2011 to ensure the Group had dedicated resource to focus on:

·; managing Flybe's first continental European based airline, Flybe Finland (in JV with Finnair); and

·; identifying and delivering other strategic growth opportunities in Europe.

Flybe and Finnair's newly established joint venture, Flybe Nordic, completed the acquisition of Finncomm in August 2011. The acquired business has been successfully rebranded as Flybe Finland and the business is now providing contract flying for Finnair and, with the start of the IATA winter season on 30 October 2011, operating the Flybe business model on a new scheduled route network, including routes to Bromma in Sweden and Copenhagen in Denmark.

Trading is broadly in line with our expectations at the time of acquisition, and we remain excited by the opportunities for Flybe Finland.

Flybe Europe will be adopting a similar fuel and foreign exchange policy to that in Flybe UK, and an update on the division's hedging programme will be given with the Group's 2011/12 results in June 2012.

Flybe Aviation Support

Flybe Aviation Support provides maintenance, repair and overhaul ('MRO') and training services to Flybe UK, Flybe Europe and third party customers.

In Q3 2011/12, the MRO business produced a total of 161.4k man hours (of which third party hours were 100.9k), an increase of 44.5% on Q3 2010/11.

Following the opening of Flybe's new Training Academy in Exeter in the Spring of 2011, the business has moved into its commercialisation phase. Two flight simulators have been installed in the Academy (one Q400, one E170-E190), providing training for Flybe and third party pilots.

Fleet

Financing

In November 2011, Flybe announced it had signed a committed financing of circa $500 million for up to 20 new Embraer E175 regional jet aircraft scheduled for delivery between November 2011 and July 2014. The loan facility was signed with BNDES, the Brazilian Export Development Bank.

Deliveries

The first four new 88-seat Embraer E175 regional jets (out of the firm order for 35 aircraft) were delivered in Q3 2011/12, with debt finance provided from the BNDES facility referred to above.

Flybe is scheduled to take delivery of six E175s in 2012/13.

Disposals

As part of Flybe's ongoing policy of optimising its fleet capacity, two Bombardier Q400 aircraft were sold to RMB during Q3 2011/12, which leased them to South African Express. This brings the total number of Q400 aircraft sold as part of this agreement to seven, as announced on 15 September 2011.

Two other Q400s have been handed back to lessors at the end of their lease terms.

Current fleet

Flybe's current aircraft fleet under management is as follows:

The average age of the fleet is 4.5 years.

Current trading

In January 2012, seats flown by Flybe UK totalled 0.76 million, a reduction of 6% on January 2011. Passenger revenue per seat in January 2012 showed an increase of c3% on January 2011.

3 Based on anticipated fuel and USD requirements.

END

Notes:

1. Passengers are people with an issued ticket where the ticket has charged a fare and/or a passenger surcharge and tax (if applicable). This includes people who purchase a ticket and do not show up for the flight where, as is usually the case, the ticket is non-refundable.

2. Seats represent the number of seats flown.

3. Load factor is the number of passengers divided by seats flown.

4. Ticket yield represents total ticket revenue per passenger (after the deduction of government taxes and levies).

5. Ancillary yield is total ancillary revenue per passenger.

6. Passenger yield represents total ticket and ancillary revenue per passenger.

7. Passenger revenue per seat represents total ticket and ancillary revenue per seat.

8. On-time arrivals occur when an aircraft arrives within 15 minutes of its scheduled arrival time.