Trading Update

Flybe Group plc

("Flybe" or "the Group")

Close period trading update

Ahead of the announcement on 11 June 2014 of results for the year ended 31 March 2014, Flybe, Europe's largest regional airline, announces the following trading update.

Current Trading

The Group performed in line with management expectations through the final quarter of the year ended 31 March 2014.

Despite a 4% capacity reduction in Flybe's UK scheduled airline in Q4 2013/14 to 2.2m seats (Q4 2012/13: 2.3m seats), passenger volumes grew 6% year-on-year to 1.6m, with load factors increasing by 6ppt to 70%. This largely reflects the continued success of Flybe's competitive pricing strategy to offer more attractive lead-in fares, with higher passenger volumes more than offsetting lower yields, leading to a 4% increase in passenger revenue per seat to £49.80.

Following the successful completion of the firm placing and open offer raising £150m (net) in March 2014, total cash at the year end was £218m.

Forward sales performance for Summer 2014 for Flybe's UK airline remains positive, with 20% of Summer 2014 seat capacity sold at 31 March 2014, compared with 17% at 31 March 2013. Some of the year on year improvement results from a later Easter this year. Encouragingly, the eight new routes launched in February from the UK's second largest city, Birmingham, have exceeded expectations with 30% of Summer 2014 seat capacity already sold. Flybe is now offering 126 Summer routes and 2,600 flights a week across the UK and Europe.

Strategy Implementation

The Group remains on track to deliver both Phases 1 and 2 of the Turnaround Plan (announced in January and May 2013), and the Immediate Actions (launched in November 2013). Collectively, these generated total savings in 2013/14 of £47m, and are expected to deliver c£71m of savings in 2014/15, in line with the targets outlined in November 2013. Constructive discussions continue with a range of business partners, including airports, airlines, suppliers and lessors. Management continue to review operating practices throughout the Group, with the aim of driving improved performance across the simpler, leaner business structure following the launch of 'One Flybe' in November 2013.

Flybe relaunched its brand this month with a reinvigorated product and service offering under the new advertising strapline: 'The fastest way from A to Flybe', bringing to life the core business of time-saving, punctual travel. This is backed by the introduction of a new marketing campaign, including new TV adverts, and a world-first 60:60 On Time Guarantee. This promises passengers that if a flight arrives more than 60 minutes late at its destination due to a delay within Flybe's control, they will qualify for a £60 voucher towards their next flight if they book it within 60 days.

The first stage of a major refresh of the Flybe website has also been unveiled and ticket options have been renamed to make them clearer for customers: 'Just Fly' for a flight ticket only; 'Get More' includes hold baggage, seat selection and a ticket change; and 'All In' offers the full range of options, including access to business lounges, fully flexible tickets and free food and drink on board.

The announcement on 25 March 2014 that Stobart Air is to become a franchisee, complementing the existing LoganAir franchise arrangements, further strengthens Flybe's network in the UK with the addition of two further aircraft flying in Flybe colours from Southend.

The White Label business in Finland (part of the Joint Venture with Finnair) continues to be profitable, performing in line with expectations. However, the Joint Venture is addressing the performance of the scheduled flying part of the business, withdrawing two (of the six) aircraft from service in Q1 2014/15.

Flybe now has a strong balance sheet and an increasingly competitive cost structure on which to base its twin engine growth strategy of growing its UK regional branded airline business and expanding its provision of regional white label services to national flag carriers across Europe.

4 April 2014

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