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 August 2012, incorporating its performance in the first quarter ended 30 June 2012 ('Q1 2012/13') and revised outlook for the full year.

Flybe will announce its interim results for the half-year ended 30 September 2012 on Friday 9 November 2012.

Financial highlights

Group

·; Total revenue under management showed an increase of 20.4% to £193.2 million, driven by Flybe's entry into Continental Europe through Flybe Finland, the joint venture with Finnair.

·; Group revenue increased by 1.6% to £163.0 million.

·; Operated seats flown under management (including contract flying and charter) were 3.9 million, up by 22.5% from 3.2 million in Q1 2011/12.

·; Scheduled seats flown under management were up by 6.6% to 3.3 million.

·; Total cash at 30 June 2012 was £59.8 million, of which £35.1 million was free cash.

Flybe UK

·; Flybe UK generated total revenues of £156.4 million in Q1 2012/13, up 0.7% on Q1 2011/12.

·; Operated seats flown were up 1.2% to 3.2 million.

·; Scheduled seats flown were 3.1 million, down 1.8% on Q1 2011/12.

·; Passengers totalled 1.9 million, down 3.0% on Q1 2011/12, representing a load factor of 62.4% (Q1 2011/12: 63.1%), reflecting the continued challenging market conditions, particularly on UK to European business routes.

·; Passenger revenue per seat was up 0.4% at £47.99. There has been an impact on this KPI from the removal of debit card charging from April 2012 as directed by the Office for Fair Trading ('OFT').

·; Costs per scheduled seat for the quarter to 30 June 2012 (excluding fuel, and charter and contract flying costs) increased by 1.0%.

·; Fuel is hedged at $998 per tonne for 91% of forecast burn in Q2 2012/13 and 83% hedged for H2 2012/13 at $1,015 per tonne.

Flybe Europe

·; Flybe Finland generated total revenues of £30.2 million in Q1 2012/13, comprising passenger revenue of £9.4 million and other revenue of £20.8 million (primarily contract flying for Finnair).

·; Operated seats flown were 0.7 million, of which scheduled seats totalled 0.3 million. Passenger numbers and load factor were 0.1 million and 43.6% respectively.

·; Passenger revenue per seat was £35.66.

Flybe Aviation Support

·; Flybe's MRO facility produced 141k man hours in Q1 2012/13 (of which 93k man hours were for third party customers), an increase of 2.9% on Q1 2011/12.

Strategic and operational highlights

Flybe UK

·; Re-positioning Flybe UK to a more customer focussed and transparent pricing model under the strapline 'Making flying better' - key principles:

- Increase flight frequency and connections to offer greater choice and flexibility - including the launch of Flybe's regional hub concept at Manchester airport.

- Improve the transparency of pricing and booking processes - removal of debit card charges, introduction of 'New Economy' ticket, which includes in the ticket price hold baggage, advanced seat assignment, one ticket change and SMS confirmation.

- Reduce the hassle of air travel through UK airports - Flybe is working with its largest airports to improve the airport experience for customers.

·; Commencement of Flybe UK's two-year contract flying agreement with Brussels Airlines:

- In Q1 2012/13, Flybe UK commenced operation of two Bombardier Q400 aircraft - with pilots, cabin crew and engineering support - for Brussels Airlines.

- Agreement has been extended to include two further Q400 aircraft, commencing in Winter 2012/13, again for a two-year period.

·; Announcement of a major expansion of regional services from East Midlands to Amsterdam, Paris CDG, Edinburgh, Glasgow and Jersey from September 2012.

·; Took delivery of a further three Embraer E175 regional jets (from the firm order of 35 placed in July 2010) taking the total delivered to seven.

·; Market share of Flybe brand in the three months to 30 June 2012:

- UK domestic market - 28.3%

- UK regional market (excluding London) - 51.2%.

Flybe Europe

·; Announcement of Memorandum of Understanding signed with Finnair, whereby the Flybe Finland joint venture will fly 12 Embraer E190 aircraft under contract for Finnair, commencing at the start of the IATA 2012/13 Winter season.

Trading outlook

·; Revenue:

- Although forward booking visibility remains extremely limited, the continuing challenges in the UK and Eurozone economies, together with distortions from the Jubilee and Olympics, mean that Group revenue trends for the year to 31 March 2013 currently point to YOY growth of between flat and 2%, which is below our previous expectations.

·; Costs:

- We continue to maintain a tight control on costs, keeping unit cost increases (excluding fuel) in Q1 2012/13 to within 1% of prior year, despite significant infrastructure and regulatory cost pressures.

- As a result of the current revenue outlook, we are targeting further cost saving initiatives through a range of measures, including capacity management and supplier cost reduction. We will be providing an update on these initiatives with our interim results to 30 September 2012.

- The impact of these further initiatives in 2012/13 mean that we expect Group costs excluding fuel to be flat YOY and, including fuel, to increase by c2.5%.

·; Cash/liquidity:

- We expect the Group to deliver positive EBITDA and operating cash for the year to 31 March 2013.

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

"2012/13 is proving to be another very challenging year in the European regional aviation sector with continued weak consumer markets and stubbornly high oil prices. After four years of consecutive decline, the UK domestic air market had shown signs of stabilising this year although June slipped back into 3% year on year decline. Whilst the UK to European leisure routes performed well in Q1, the UK to European business market has shown signs of weakness in recent months, leading to today's revised trading outlook.

"We remain cautious over the outlook and do not expect a material recovery in either consumer or business confidence in the short term. We therefore remain focused on executing our comprehensive action plan to both grow the business whilst mitigating cost pressures.

"In May 2012, Flybe Europe announced the signing of a Memorandum of Understanding with Finnair, whereby the Flybe Finland joint venture will fly 12 Embraer E190 jets on a contract flying arrangement for Finnair from the start of the IATA 2012/13 Winter season. In addition, we now have four aircraft and crews deployed on contract flying with Brussels Airlines, meaning that by the end of this calendar year, almost 25% of the fleet under our management will be deployed on lower risk contract flying.

"In addition, the launch of Flybe UK's 'Making flying better' campaign received positive customer feedback and we have seen 'New Economy' sales as a percentage of online bookings increase from 14% to 24% in recent weeks, with our target being 30%. However, the removal of debit card fees as directed by the Office of Fair Trading has proved a further challenge to us this year.

"Flybe UK's brand market share in the UK regions remains at above 50%, we have a robust and flexible business model and clear growth plans. Although we expect market conditions to remain challenging, 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 August 2012

Enquiries:

Flybe under management KPIs (including Flybe Finland)

Flybe UK

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

KPIs

Revenue

Operated seats flown in Q1 2012/13 increased by 1.2% to 3.23 million. Scheduled seats flown in the period were 3.08 million which was 1.8% down on Q1 2011/12.

Passenger numbers in Q1 2012/13 were 1.92 million, 3.0% lower than the same period in 2011/12. The load factor also showed a small decrease of 0.7 ppts to 62.4%.

Passenger yield increased by 1.6% to £76.92 - this increase was suppressed by the impact of removing debit card charging in April 2012 in accordance with OFT directions. We are disappointed that certain airlines have yet to implement these recommendations.

Passenger revenues of £147.6 million were down by 1.4% on the prior year. Passenger revenue per scheduled seat was up by 0.4% at £47.99.

Flybe generated contract flying revenues in Q1 2012/13 of £2.1 million, and other revenue (including charter, cargo, retail and franchise) increased by 19.6% to £6.7 million, the increase being driven by growth in charter revenue.

Costs

Flybe UK's costs per scheduled seat for the quarter to 30 June 2012 (excluding fuel and charter and contract flying costs) increased by 1.0%.

Hedging

Flybe UK's current hedge books are summarised below (all hedges are forward swaps).

Jet fuel

·; Q2 2012/13 - 91% hedged at $998 per tonne

·; H2 2012/13 - 83% hedged at $1,015 per tonne

·; H1 2013/14 - 37% hedged at $967 per tonne

US Dollar

·; Q2 2012/13 - 90% hedged at $1.61

·; H2 2012/13 - 76% hedged at $1.58

·; H1 2013/14 - 49% hedged at $1.58

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

Market share

Market share of the Flybe brand in the UK regional market (excluding London) in the three months to 30 June 2012 was 51.2% (Q1 2011/12: 51.8%).

Total UK domestic market share of the Flybe brand in the same period was 28.3% (Q1 2011/12: 29.2%).

Flybe Europe

Flybe Europe comprises Flybe Finland and the Finnish Aircraft Maintenance Oy ('FAM') MRO operation.

In June 2012, Flybe Group plc acquired for a consideration of £0.3 million (€0.4 million) a further 13.7% holding (6.3% of which was acquired from a subsidiary of Finnair) of FAM, to give a total ownership of 60.0%. In order to simplify the joint venture arrangements, FAM was transferred, via a share-for-share exchange, into the Flybe Nordic joint venture, becoming a wholly owned subsidiary within that group.

KPIs

Flybe Europe will be adopting a similar fuel and foreign exchange policy to that in Flybe UK and negotiations with potential counterparties in both Finland and the UK are currently in progress.

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 Q1 2012/13, the MRO business produced a total of 141,300 man hours, an increase of 2.9% on Q1 2011/12, of which third party hours were 92,900, an increase of 24.8% on Q1 2011/12.

Two flight simulators have now been installed in the Academy (one Bombardier Q400, one Embraer E170-E190), providing training for Flybe and third party pilots.

Fleet

Deliveries

Three new 88-seat Embraer E175 regional jets (out of the firm order for 35 aircraft) were delivered in Q1 2012/13, two on finance lease with debt finance provided from Flybe's committed BNDES facility and one on an operating lease.

Flybe is scheduled to take delivery of a further three E175s in this financial year.

Disposals

During Q1 2012/13 one Q400 was handed back to the lessor at the end of its lease terms.

Current fleet

As at 30 June 2012 Flybe's aircraft fleet under management is as follows:

The average age of the fleet is 4.6 years.

Current trading

In July 2012, scheduled seats flown by Flybe UK totalled 1.07 million, a reduction of 2.7% on July 2011. Passenger revenue per seat in July 2012 showed a decrease of 1.8% on July 2011.

Forward ticket sales revenue for Flybe UK for the remainder of the 2012 summer flying programme from August to October currently shows an increase of 0.3% over the same time last year, against scheduled seat capacity down by circa 2%, with yield growth being offset by a reduction in passenger numbers.

END

Notes:

1. Operated seats are the number of seats flown including those on Flybe scheduled services, contract flying and charter flights.

2. Scheduled seats are the number of seats flown on Flybe scheduled services.

3. 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.

4. Seats represent the number of seats flown.

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

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

7. Ancillary yield is total ancillary revenue per passenger.

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

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

10. IATA is the International Air Transport Association.

Forward-looking statements:

Certain information included in these statements is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.

Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions and Flybe Group plc ("the Group‟) plans and objectives for future operations, including, without limitation, discussions of the Group's Business Plan, expected future revenues, financing plans and expected expenditures. All forward-looking statements in this report are based upon information known to the Group on the date of this IMS. The Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

It is not reasonably possible to itemise all of the many factors and specific events that could cause the Group's forward-looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of the business. Further information on the primary risks of the business and the risk management process of the Group is given in the Annual Report and Accounts 2011/12; these documents are available on http://www.flybe.com/corporate/investors.