Flybe - 2012/13 Half-year Results Analyst and Investor Presentation 8 November 2012
Agenda 2 Introduction Jim French, Chairman & CEO Financial Review Strategy Strategic Update Review & Business Review Update Outlook
H1 2012/13 - Overview Highlights g Building European business to reduce reliance on UK economy 38.6% of airline revenue from non-uk domestic flying (H1 2011/12: 32.1%) Further 12 E190s flying under contract for Finnair from Winter 2012/13 Launch of Making flying better and Manchester hub in UK New routes at East Midlands Fleet renewal and matching aircraft capacity to market needs Delivery of four E175 aircraft, further two in H2 2012/13 Disposed of two Q400s Four Q400s contract flying for Brussels Airlines in H2 2012/13 Challenging period Continuing weak economic backdrop Stubbornly high fuel prices Regulatory and infrastructure cost pressures Ever increasing APD Transition towards more transparent ancillary model Strategy remains on track Flybe at a Glance 52.6% UK Regions (1) market ktshare 29.1% share of UK domestic market 40m 4.0m Flybe UK passengers (H1 2011/12: 4.2m) 6.2m Flybe UK seats flown (H1 2011/12: 6.4m) (1) Including Loganair, excluding London airports 3
Flybe Europe s Largest Regional Airline 209 Routes 35 UK airports 71 European airports 20 Countries 3,500+ Staff 97 Aircraft Route map from Winter 2012/13, based on new contract flying agreement with Finnair 4
Agenda 5 Introduction Financial Review Andrew Knuckey, CFO Strategy Strategic Update Review & Business Review Update Outlook
Financial Highlights Revenue under management, including Flybe Finland, up 13.2% to 396.3m Group revenue stable at 340.8m Flybe UK passenger revenue per seat stable at 49.90 Flybe UK costs per seat (at constant currency and fuel) up 5.0% to 52.57 EBITDAR (1) down 23.9% to 46.7m Operating profit (2) of 1.1m vs. 16.7m in H1 2011/12 Loss before tax of (1.3)m vs. profit of 14.3m in H1 2011/12 Operating cash outflow of (4.8)m vs. inflow of 13.0m in H1 2011/12 Net debt (3) of (50.0)m vs. (29.7)m at March 2012 Net assets 85.4m vs. 89.4m at March 2012 Financials at a Glance 396.3m Revenue under management up 13.2% 46.7m EBITDAR 1.1m Operating profit 85.4m Net assets (1) EBITDAR comprises (loss)/profit before tax and adds back interest, depreciation (exc. maintenance assets), amortisation and aircraft rental charges (2) Operating profit before share of joint venture result (3) Net debt comprises total cash (including restricted cash) less borrowings 6
Group Divisional Revenues & EBITDAR H1 2012/13 H1 2011/12 Change m m Revenues Flybe UK 328.5 329.1 (0.2)% Flybe Europe 55.5 8.6 n/m Flybe Aviation Support 21.6 22.6 (4.4)% Inter-segment tsales (9.3) (10.1) 1) 79% 7.9 Revenue under management 396.3 350.2 13.2 % Less: Revenue from Flybe Europe joint venture (55.5) (8.6) n/m Group revenue (excluding investment income) 340.8 341.6 (0.2)% EBITDAR Flybe UK 49.5 62.1 (20.3)% Flybe Europe (0.5) (0.1) n/m Flybe Aviation Support (0.5) 0.9 n/m Group costs (1.8) (1.5) (20.0)% 0)% Group 46.7 61.4 (23.9)% Flybe Finland only trading for one month in H1 2011/12 Growth in revenue under management di driven by Flybe Finland Group revenues stable at 340.8m EBITDAR down (23.9)% to 46.7m 7
Group - Divisional Results H1 2012/13 H1 2011/12 m m Flybe UK 3.8 16.0 Flybe Europe (2.4) (0.6) Flybe Aviation Support (0.9) 0.4 Total Divisional results 0.5 15.8 Group costs (1.8) (1.5) (Loss)/profit before tax (1.3) 14.3 Tax credit - 03 0.3 (Loss)/profit after tax (1.3) 14.6 (Loss)/profit before tax - reported (1.3) 14.3 Add back of revaluation gain on USD aircraft loans (0.7) - Underlying (loss)/profit before tax (2.0) 14.3 (Loss)/earnings per share (basic), pence (1.7) 19.4 Flybe Finland only trading for one month in H1 2011/12 BNDES USD loans on six E175 finance leases 8
Flybe UK - Divisional Results H1 2012/13 H1 2011/12 Change m m Revenue 328.5 329.1 (0.2)% Fuel (68.6) 6) (55.9) (22.7)% Operating costs (exc fuel and aircraft ownership costs) (210.4) (211.1) 0.3 % EBITDAR (1) 49.5 62.1 (20.3)% Margin +15.1 % +18.9 % (3.8)ppt Finance and ownership (45.7) (46.1) +0.9 % Divisional i i profit 38 3.8 16.0 (76.2)% Margin +1.2 % +4.9 % (3.7)ppt EBITDAR margin down (3.8)ppt to 15.1% Fuel cost per seat, 11.06 8.73 (26.7)% Other costs per seat, 41.51 40.11 (3.5)% Other costs per seat at constant currency, 41.51 39.50 (5.1)% Operating costs per total seats (exc fuel) increased by less than inflation vs. H1 2011/12 Despite macro-economic challenges and fuel costs up 22.7%, core Flybe UK (1) EBITDAR comprises PBT and adds back interest, depreciation (exc maintenance assets), amortisation and aircraft rental charges business generated a profit 9
Flybe UK - Revenue H1 2012/13 H1 2011/12 Change Passengers (m) 4.0 4.2 (3.4)% Load factor (%) 65.0 65.66 (0.6)ppt Seats (m) 6.2 6.4 (2.6)% Sector length (km) 466 468 (0.4)% Passenger revenue ( m) 310.3 318.4 (2.5)% Passenger yield ( ) 76.77 76.06 +0.9 % Contract flying revenue ( m) 4.5 - n/m Revenue from other activities ( m) 13.7 10.7 +28.0 % Total revenue ( m) 328.5 329.1 (0.2)% Passenger revenue per seat ( ) 49.90 49.88 +0.0 % Contract flying revenue from Brussels Airlines, also increase in charter revenue Load factor down (0.6)ppt, passengers down (3.4)% - impact of macroeconomic backdrop and Olympic effect Ticket yield increase offset by loss of debit card charges in ancillary revenue 10
Flybe UK Operating Cost per Seat 54 53 Effective cost per tonne increased from $798 to $1,008 075 0.75 0.14 001 0.01 52.57 52 51 Effective USD rate moved from 1.58 to 1.61 2.54 0.45 0.66 50 49 48 48.84 (0.82) 48.02 Excluding costs relating to contract flying, broadly in line with H1 11/12 47 H1 2011/12 Operating cost per seat Foreign exchange H1 2011/12 Operating cost per seat at constant currency Fuel Net airport, en route charges and ground operations Aircraft rental charges, maintenance and currency operations depreciation Staff costs Marketing and distribution costs Other operating expenses H1 2012/13 Operating cost per seat 11
Flybe UK Impact of Fuel H1 2012/13 H1 2011/12 Change Fuel $ / metric tonne - Market rate 1,008 1,044 36 - Effective price 1,008 798 (210) USD rate - Market rate 1.58 1.62 $(0.04) - Effective price 1.61 1.58 $0.03 Actual cost of fuel / metric tonne 626 505 (121) 12
Flybe UK Hedging Positions Jtf Jet fuel 84% of anticipated requirement for half year to March 2013 hedged at $1,015 per tonne 59% of anticipated requirement for half year to September 2013 hedged at $980 per tonne US Dollar 87% of anticipated requirement for half year to March 2013 hedged at $1.59 60% of anticipated requirement for half year to September 2013 hedged at $1.58 Euro Small net exposure of < 20m, no formal hedging 13
Flybe Europe - Financial Results H1 2012/13 H1 2011/12 m m Revenue 55.5 8.6 Fuel (11.3) (1.5) Operating costs (exc fuel and aircraft ownership costs) (40.4) (6.1) EBITDAR (1) 3.8 1.0 Margin +6.8 % +11.6 % Finance and ownership (8.3) (1.6) Flybe Finland - loss before tax (4.5) (0.6) Margin (8.1)% (7.0)% Tax credit 11 1.1 - Flybe Finland - loss after tax (3.4) (0.6) Flybe 60% share of loss from JV of (2.1)m, on plan After central management costs Flybe Group - 60% share of loss after tax (2.1) (0.5) and interest Flybe Europe received, Flybe - central management costs (0.5) (0.1) Europe loss was - interest received 0.2 - (7.2)% of Flybe s Flybe Europe - divisional result (2.4) (0.6) share of revenue (1) EBITDAR comprises PBT and adds back interest, depreciation (exc maintenance assets), amortisation and aircraft rental charges 14
Flybe Europe - Revenue H1 2012/13 H1 2011/12 Passengers ('000) 194 31 Load factor (%) 42.2 39.4 Seats ('000) 459 79 Sector length (km) 401 366 Passenger revenue ( m) 16.4 2.5 Passenger yield ( ) 84.55 80.43 Contract flying ( m) 36.7 5.8 Revenue from other activities ( m) 24 2.4 03 0.3 Total revenue ( m) 55.5 8.6 Passenger revenue per seat ( ) 35.70 31.66 H1 2011/12 contract flying revenue generated from seven ATR turboprops and two E170s 12 E190 aircraft from October 2012, taking total to 21 out of 28 Flybe Finland aircraft deployed on contract flying 15
Flybe Aviation Support H1 2012/13 H1 2011/12 Change Financial results MRO loss of Maintenance, repair and overhaul 19.1 21.1 (9.5)% (0.7)m, Training Training Academy 2.5 1.5 66.7 % Academy loss of (0.2) Total revenue 21.6 22.6 (4.4)% Operating costs (22.5) (22.2) (1.4)% Divisional profit (0.9) 04 0.4 n/m Operational headlines Third party man hours 179 186 (3.8)% Flybe man hours 96 120 (20.0)% Total man hours 275 306 (10.1)% (10.1)% YOY decline in MRO man hours impact of weak Q2 16
Group - Fleet Under Management At September At March Fleet substitution i 2012 2012 Movements continues, Flybe UK Flybe UK fleet up by one Embraer 118-seat E195 regional jet 14 14 - aircraft at Embraer 88-seat E175 regional jet 8 4 4 September 2012 Bombardier 78-seat Q400 turboprop 47 50 (3) four Q400s now Flybe UK total 69 68 1 contract flying for Brussels, four Flybe Europe ATR 48-seat ATR42 turboprop 3 3 - grounded for Winter 12/13 ATR 68- and 72-seat ATR72 turboprop 11 11 - Embraer 76-seat E170 regional jet 2 2 - Flybe Europe total 16 16 - Now 28 aircraft in fleet, of which 21 are Total 85 84 1 contract flying Held on operating lease 75 74 1 Owned and debt financed 10 10 - Now 97 aircraft (of Total 85 84 1 which 25 are contract flying), Total seats in fleet under management 7,078 6,960 118 total seats 8,302, Average seats per aircraft 83.3 82.9 0.4 average age 4.7 Average age of ffleet t( (years) 47 4.7 46 4.6 (0.1) years 17
Group Cash Flow 80 70 Two E175 deliveries acquired on finance lease, disposal of two Q400s 60 31.2 59.1 50 42.9 6.9 (4.0) (1.3) (6.4) m 40 (22.0) 30 11.8 27.9 20 10 Group operating cash outflow (4.8)m 0 Free cash at March 2012 Loss for period Depreciation and amortisation Net working capital Transfer to restricted cash Capital expenditure net of disposal proceeds Financing Free cash at September 2012 Restricted cash Total cash 18
Group Balance Sheet At September 2012 At March 2012 Movements m m m Fixed assets 181.6 162.1 19.5 Cash and restricted cash 59.1 67.6 (8.5) Landing slots and other intangible assets 10.2 10.11 01 0.1 Joint ventures 14.4 16.2 (1.8) Derivative financial instruments (3.6) 3.9 (7.5) Aircraft deposits 16.4 19.8 (3.4) Other assets 131.6 135.6 (4.0) Total assets 409.7 415.3 (5.6) Net debt at 30 September 2012 of (50.0)m, vs (29.7)mat March 2012 Debt (109.1) (97.3) (11.8) Other liabilities (215.2) 2) (228.6) 13.4 Net assets of 85.4m Net assets and shareholders' funds 85.4 89.4 (4.0) 19
Agenda 20 Introduction Financial Review Strategy Strategic Review Update & Business Update Review - Jim French, Chairman & CEO Outlook
Flybe Today UK s No. 1 regional airline Europe s Largest Regional Airline 29.1% brand market share, 52.6% share of regional domestic market Europe s largest regional airline Rapidly growing European business Led by low risk, long-term contract flying Europe s leading regional MRO and training facilities Independent relationships i include: Finnair joint venture, contract flying, codeshare BA shareholder, h codeshare Air France/KLM codeshare, capacity share Brussels Airlines contract flying 21
Delivering Our Strategy Capitalising on UK Leadership Manchester hub concept Fully functioning regional hub 17 connecting routes 7 new routes from East Midlands and Birmingham following closure of BMI Baby Challenging UK domestic market UK Domestic Travel 2002 2011 Down 20.6% since 2007 Flybe brand market share increased from 14.2% to 30 6 25 5 20 4 29.1% 15 160% increase in APD Millions s3 10 2 Sum of Total Sum of BE 5 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 22
Delivering Our Strategy Capitalising on UK Leadership Launch of Making flying better Removal of debit card charges transitional impact on ancillary revenues Other airlines continue to impose administration fees Key components of Making flying better winter winter Promotional codes New FFP Upgrade to 175 jets Manchester Hub Assigned Seating Focus on cost and capacity management 17 aircraft out of scheduled service since 2008 Initiatives under way to deliver 2 per seat cost saving from 2013/14 onwards October summer june Online self management for disruptions Onboard Wi-fi trial Self Bag Tag Trials Mobile booking, apps, check-in Larger hand baggage sizes Making flying better New economy ticket inc ancillaries Per booking credit card charges Flight frequency New website New look advertising inc TV No debit card charges 22 Growth in revenue from contract flying and charters 23
Delivering Our Strategy European Growth Flybe Finland Now Finland s largest domestic airline New contract flying agreement with Finnair 12 E190s, commenced 28 October 2012 Significant overhead cost reduction since acquisition in August 2011 Revenue in 2013/14 expected to be 300m+, targeted profitability in line with original business plan and cash generative Further opportunities in Europe Significant rationalisation and consolidation Through alliances with national carriers such as joint ventures, contract flying or codeshare Flybe well placed to benefit 38.6% of Flybe s airline revenue touches Europe Expected to increase 24
Delivering Our Strategy Fleet Renewal At October 2012 97 aircraft, average age 4.7 years 36 Embraer E-Series regional Jets 47 Bombardier Q400 turboprops ops 14 ATR turboprops 25 contract flying, 72 scheduled flying Scheduled deliveries to March 2013 Delivery of two Embraer 88-seat E175 regional Jets Indicative profile of fleet under management at March 2013 38 Embraer E-Series regional Jets 47 Bombardier 78-seat Q400 turboprops 14 ATR turboprops 99 total aircraft 25 contract flying, 74 scheduled flying 25
Agenda 26 Introduction Financial Review Strategy Strategic Update Review & Business Review Update Outlook Jim French, Chairman & CEO
Outlook UK Forward passenger sales revenue in Flybe UK for Winter 2012/13 ahead c2.5% YOY, on capacity 1% to 2% down H2 YOY fuel increase expected to be c. 6m, compared with c. 13m in H1 2012/13 Six new routes at East Midlands Four Q400 aircraft contract flying for Brussels, four aircraft grounded for Winter 2012/13 Initiatives underway to deliver 2 per seat annual cost savings from 2013/14 Europe Excellent progress in Flybe Finland on plan and targeted to be profitable in 2013/14 Other low risk growth opportunities being evaluated Aviation Support Adjusting cost base to reflect current weaker trends in 3 rd party MRO activity Commercialisation of Training Academy progressing well targeting profitability in 2013/14 27
Outlook No change to 2012/13 revised guidance given on 10 August 2012 Group revenue current trends point to YOY growth of between flat and 2% Group costs including fuel, an increase YOY of c2.5% Strategy t on track But against backdrop of current macro-economic headwinds Medium term financial target remains 7% operating margin With actions being taken to restore profitability to Flybe UK, and the continuing growth and move to profitability in Flybe Europe, the Board remains confident about Flybe s future prospects 28
Flybe - 2012/13 Half-year Results Analyst and Investor Presentation 8 November 2012
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