Flybe Group Regulatory News (FLYB)

Flybe Group plc

("Flybe" or "the Group")

Trading update

RESILIENT PERFORMANCE AND STABLE OUTLOOK IN A CHALLENGING UK MARKET

Following the Interim Management Statement issued on 11 February 2011, and ahead of the announcement of results for the year ended 31 March 2011 on 30 June 2011, Flybe, Europe's largest regional airline, is pleased to issue the following trading update.

Trading and Operational Update

In Q4 2010/11 total seats flown increased by 4.5% over Q4 2009/10 to 2.6 million and, despite a 4.4 percentage point reduction in load factor, passenger yields grew by 10.5%, resulting in passenger revenue per seat increasing by 2.2% to £46.14 against the same period last year.

Whilst 45% of Flybe's passengers fly on business (and this sector has proved very resilient), the slowdown in consumer retail spending in the UK had an impact on discretionary-spend passenger volumes (ie those travelling for leisure or visiting friends and relatives) in February and March 2011. Flybe has maintained its leading position in its core UK domestic market with a 27% market share for the Flybe brand in the year to March 2011, and has also been recognised as the UK's most punctual major airline (CAA statistics, 2010).

Management has focused on optimising passenger revenues per seat and, despite the volume challenges experienced in the last two months of 2010/11, the Board estimates that underlying profit before tax and one-off items (see below) for the year ended 31 March 2011 will be circa £22 million. This result is in line with the Board's expectations for the year and represents a strong performance in view of the challenging economic conditions in the final quarter.

As previously announced, the Group faced a number of one-off costs during the year which will be reported in the full year accounts. These include the disruption caused by the Icelandic volcano in April and May 2010 (£11.6 million), severe adverse weather conditions in the UK in December 2010 (£6.5 million), costs related to the Group's recent IPO (£1.7 million) and unrealised losses on fuel and foreign exchange hedges (£6.8 million).

Total cash at the year end was £105.6m, with net cash (total cash less borrowings) of £21.9m. Net assets amounted to c£110m.

Continental European Development

In line with the Group's objective to expand the Flybe brand and business model across Continental Europe, we continue to evaluate a number of opportunities which could deliver strong strategic and financial benefits to the Group.

Industrial Relations

Flybe has reached agreement with UNITE on a one year pay deal for cabin crew to 31 March 2012.

Negotiations continue with BALPA on a pay deal for pilots.

Fuel

Fuel has been hedged at $786 per tonne for 69% of the Group's forecast 2011/12 fuel requirement. 88% of H1 2011/12 fuel has been hedged at $760 per tonne, thus minimising the Group's exposure to fluctuating oil prices in the first half of the year. For the second half of 2011/12, 46% of fuel has been hedged at $843 per tonne, meaning the Group has greater exposure to higher spot prices of fuel from Winter 2011/12.

Flybe will introduce a fuel surcharge of £3 per passenger for bookings made from 5 May 2011 for flights on or after 1 September 2011. The surcharge will be removed should the price of Brent crude return to below $75 per barrel for a consecutive period of 28 days.

Current Trading and Outlook

The market in the UK remains challenging and the Group is continuing to focus on improving operating efficiency to increase yields whilst maintaining seat capacity at similar levels to the 2010/2011 year. At 3 May 2011, forward ticket sales revenue for the Summer 2011 season was ahead year-on-year by 5.4%.

We are taking decisive actions to optimise capacity and passenger yields in the UK, including the possible disposal of surplus aircraft. This will ensure that Flybe is strongly placed to benefit from recovery in its core market.

The Board is confident that, despite current macro-economic challenges and assuming fuel prices remain at their current level, the Group is on-track to deliver a result for the current year 2011/12 that will be broadly comparable to the 2010/11 underlying profit before tax and one-off items.

Jim French, Chairman and Chief Executive Officer, commented:

"Against an extremely challenging macro-economic backdrop in our core UK market, Flybe performed strongly. This further underlines the resilience and flexibility of our business model.

"Actions being taken to optimise passenger yield and streamline capacity in the UK will ensure that Flybe is well positioned to benefit from recovery in its core market whilst progress is made to expand the Group's presence across Continental Europe"

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