Flybe Group Regulatory News (FLYB)

Flybe Group plc("Flybe" or "the Group")

Interim Management Statement

FLYBE MAINTAINS POSITIVE UNDERLYING PERFORMANCE

Flybe, Europe's largest regional airline, today provides an update on trading for the third quarter ended 31 December 2010.

Financial highlights1:

·; Total revenue up by 1.5% to £139.5 million.

·; Seats flown increased by 1.0% to 2.8 million (without weather disruption, the estimated increase would have been 7.2% to 2.9 million).

·; Passengers down by 1.2% to 1.7 million (without weather disruption, management estimate passengers would have increased by 4.8% to 1.8 million).

·; Increase in revenue per passenger - ticket yield up by 5.2% to £63.68, ancillary yield up by 12.6% to £13.45.

·; Passenger revenue per seat up by 4.1% to £47.51.

·; Fuel hedged at $784 per tonne for 68% of forecast 2011/12 burn.

·; Strengthened balance sheet following successful IPO in December 2010, with total cash of £80 million, net cash of £11 million and net assets of £105 million.

·; As previously reported, the impact of severe weather disruption from late November though to the end of December had an estimated financial impact of £6 million.

Operational highlights:

·; Leadership in core UK domestic market strengthened - market share of the Flybe brand for the year to December 2010 was 27%, up from 25% in 2009.

·; Commenced operations of new code share and capacity agreement with Air France on 31 October 2010.

·; New Training Academy in Exeter due to open on schedule and on budget in February 2011.

·; Named best short-haul airline for the 2nd consecutive year at the Business Travel Awards.

[1] All figures are compared to the equivalent figures for the three months to 31 December 2009.

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

"Despite the unprecedented adverse weather and uncertain economic conditions, I am pleased to report growth in the Group's revenue, passenger yields and revenue per seat in the quarter ended 31 December 2010. Underlying performance, excluding the weather related disruption, remains in line with the Board's expectations.

"There were several major strategic developments for the Group during this period.

"The Group's successful flotation was a significant achievement for Flybe and was accomplished in a very challenging IPO market. We are grateful to all our employees for their continued dedication and focus during this period.

"The successful introduction of the code and capacity share agreement with Air France was a major step forward in our plans to develop services in Europe and I look forward to broadening this relationship further.

"I am delighted that our new Training Academy facilities, which will both provide a significant upgrade to our training capability and play an important role in supporting the Government's drive to increase apprenticeships, will come on stream later this month.

The Group's plans for expansion into continental Europe are progressing well, including our discussions with other European carriers."

11 February 2011

Enquiries:

Key performance indicators

Third quarter capacity and revenue

Seats flown increased by 1.0% to 2.8 million. The weather disruption from the end of November through to the end of December led to the cancellation of 1,980 flights - without this, seats flown would have increased by an estimated 7.2% to 2.9 million.

Passenger numbers decreased by 1.2% to 1.7 million. The weather disruption from the end of November through to the end of December resulted in an estimated loss of passengers of 0.1 million - without this, passenger numbers would have increased by an estimated 4.8% to 1.8 million.

Flybe's strengthened its leadership of its core UK domestic market, increasing its brand market share in the year to December 2010 (including franchisee Loganair) by 2 percentage points to 27%. Excluding Loganair, Flybe's share of the UK domestic market also grew by 2 percentage points to 25%.

Despite the impact of weather disruption, both ticket and ancillary revenues increased, driven by strong yield growth:

·; ticket revenue increased by 3.9% to £108.0 million, with ticket yield growing by 5.2% to £63.68; and

·; ancillary revenue increased by 11.2% to £22.8 million, with ancillary yield growing by 12.6% to £13.45.

Aviation Services and other revenue includes the revenue from our Olympic Air SA ("Olympic") wet lease agreement. The planned completion of this arrangement in October 2010 is the prime cause of the reduced revenue when compared to the quarter to December 2009.

Operational performance

On-time departures at 76.1% in the quarter were severely affected by the adverse weather conditions during November and December 2010. January 2011 on-time departures recovered to 87.3%, well ahead of the 82.6% experienced in the 3rd quarter of 2009/10 and the 71.1% achieved in the weather disrupted January 2010.

Third quarter Airline cost performance

Airline costs per seat for the quarter to 31 December 2010 were in line with management's expectations, other than additional costs relating to weather disruption, which are included in the estimated one-off financial impact from weather referred to below.

As previously reported, the one-off financial impact of the weather disruption in November and December 2010 is estimated at some £6m (comprising loss of revenue on cancelled flights, delay and diversion costs and additional de-icing costs, offset by savings in variable costs on cancelled flights).

Hedging

Flybe's fuel hedging for Q4 2010/11 and 2011/12 significantly reduces its short-term exposure to increased fuel costs. The Group has hedged 68% of its forecast fuel requirement for 2011/12 at $784 per tonne.

The Group's current hedge books for jet fuel and US Dollar are summarised below (all hedges are forward swaps). Flybe has a broadly neutral position in Euro income and expenditure.

Jet fuel

·; Q4 2010/11 - 90% of anticipated requirement hedged at $749 per tonne

·; 2011/12:

o H1 - 87% of anticipated requirement hedged at $760 per tonne

o H2 - 45% of anticipated requirement hedged at $839 per tonne

o FY - 68% of anticipated requirement hedged at $784 per tonne

US Dollar

·; Q4 2010/11 - 89% of anticipated requirement hedged at $1.59

·; 2011/12:

o H1 - 84% of anticipated requirement hedged at $1.56

o H2 - 47% of anticipated requirement hedged at $1.58

o FY - 66% of anticipated requirement hedged at $1.57

Fleet

The 15 month wet lease arrangement with Olympic was completed in the quarter. Under this arrangement, Flybe had leased up to four Bombardier Q400 ("Q400") aircraft with crew to Olympic. All four aircraft have now returned to operational roles within the Group's scheduled service.

Two Q400 aircraft on short-term lease were returned to Scandinavian Airline System ("SAS") in the quarter, with the final two scheduled to be returned in the quarter to 31 March 2011.

One new Q400 was delivered in January 2011, with three more scheduled deliveries due by 30 June 2011.

The first four deliveries of the 35 firm orders for 88-seat Embraer E175 regional jets are due for delivery in 2011, starting in June.

Flybe's current aircraft fleet is as follows:

Aviation Services (including the Training Academy)

Aviation Services' third party revenues for the quarter ended 31 December 2010 were £5.5 million, compared with £6.6 million in the quarter to 31 December 2009. Management believe that this reduction in turnover reflects the late cycle nature of airline maintenance and training businesses. Third party activity for the fourth quarter of 2010/11 is showing more positive trends.

Flybe's new training facility in Exeter, comprising 25 classrooms and two simulator halls, is due to open on schedule, and with costs on budget, in February 2011. This is a significant achievement given that the original contractor, Rok Building Limited, was placed into administration in late 2010.

Current trading

In January 2011, seats flown increased against a weather disrupted January 2010 by 9% to 0.8 million (management estimate that seat capacity would have increased by 2% if weather disruption in January 2010 had not occurred) and passenger revenue per seat increased by 4%.

The business continues to experience a late booking profile from its passengers. Forward ticket sales for the 2011 summer flying programme in its core UK domestic and UK to Europe markets currently show an increase over the same time last year of 8%, with the growth coming from ticket yield improvement.

Notes:

1. Net cash represents total cash (including restricted cash) less borrowings.

2. 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.

3. Seats represents the number of seats flown.

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

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

6. Ancillary yield is total ancillary revenue per passenger.

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

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

9. On-time departures occur when an aircraft brakes are released on departure no more than 15 minutes after its scheduled departure time.