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Flybe Group Plc FLYB Half Yearly Report

  Flybe Group Plc (FLYB) - Half Yearly Report

RNS Number : 6047Q
Flybe Group PLC
08 November 2012




    8 November 2012





Flybe Group plc

    ('Flybe' or 'the Group')

  

Results for the six months to 30 September 2012



    Flybe, Europe's  largest regional  airline, today  announces its  half 
    year results for the six months to 30September 2012 ('H1 2012/13') in
    which it  has  delivered stable  revenues  and maintained  its  market 
    leading position in the UK, grown its European business and  continued 
    to focus on capacity management and cost reduction.



      Key financial headlines

                                      H1 2012/13 H1 2011/12 Change

                                              £m         £m      %
Total revenue under management*            396.3      350.2   13.2
Less: joint venture revenue               (55.5)      (8.6)    N/M
Group revenue                              340.8      341.6  (0.2)
Underlying (loss)/profit before tax**      (2.0)       14.3    N/M
(Loss)/profit before tax                   (1.3)       14.3    N/M
(Loss)/profit after tax                    (1.3)       14.6    N/M



* Includes our joint venture, Flybe Finland

** See Financial review on page 7



      Summary



à Performance has continued  in line with  revised management expectations  as 
set out in the Group's Interim Management statement of 10 August 2012.

à Revenue under  management (including  Flybe Finland,  Flybe's joint  venture 
with Finnair) increased by 13.2% to £396.3m (H12011/12: £350.2m).

à Group revenue stable at £340.8m (H1 2011/12: £341.6m).

à Loss before tax of £1.3m (H1  2011/12: profit of £14.3m) and loss after  tax 
£1.3m (H1 2011/12: profit of £14.6m).

à Operating  cash  outflow in  H1  2012/13 of  £4.8m  (H1 2011/12:  inflow  of 
£13.0m).

à Net assets of £85.4m at 30 September 2012 (31 March 2012: £89.4m) and  total 
cash of £59.1m at 30 September 2012 (31 March 2012: £67.6m).

      

      Operational highlights



à Flybe UK:

- 6.2 million seats flown (H1 2011/12: 6.4 million).

- 4.0 million passengers at a load factor of 65.0% (H1 2011/12: 4.2 million
at 65.6%).

- Passenger revenue per seat stable at £49.90 (H1 2011/12: £49.88).

- Maintained 29%  market share for  the Flybe brand  in UK domestic  market 
(CAA statistics).

- Deploying existing aircraft on six new routes from East Midlands.

-  Continuing  fleet  substitution  programme  -  four  new  Embraer  E175s 
delivered, and two Bombardier Q400s sold.

à Flybe Finland:

- Contributed 14.5% of Flybe's airline revenue under management.

- Now  Finland's  largest domestic  airline  and  is expected  to  move  to 
profitability, as planned, in 2013/14.

- Major contract  to expand operations  signed in October  2012, adding  12 
Embraer E190 regional jets on contract flying arrangements for Finnair from 28
October 2012 - 21 aircraft now deployed on contract flying, out of total fleet
of 28aircraft.



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

"Our performance for the six months to 30 September 2012 has been in line with
the revised expectations set out in our Interim Management Statement of August
2012.



"The continuing challenges of the UK domestic aviation market further validate
the importance  of  our  decision  to  focus  Flybe's  long-term  strategy  on 
rebalancing our route network by growing our European operations.



"I am delighted to report that Flybe Finland, our joint venture with  Finnair, 
has continued  its impressive  trajectory  of growth,  with an  additional  12 
E-series jets now transferred  from Finnair into Flybe  Finland on a  contract 
flying basis. Finnair  is delighted  with this relationship  which they  have 
publicly stated has enabled them to reduce their overall costs significantly.
I am encouraged by the continuing dialogue that Flybe Europe's management team
are having with other parties seeking similar arrangements.



"The UK domestic aviation  market continues to show  little sign of  recovery, 
with the market trending a  year-on-year decline. Since this represents  c75% 
of Flybe UK's passenger base, this decline continues to pose challenges on our
UK business.



"Flybe UK maintained its market leading  brand position with a 29.1% share  of 
the UK domestic market and 52.6% of the regional UK market. Forward passenger
sales revenue  for  winter  2012/13  at 6November  2012  is  ahead  by  c2.5% 
year-on-year and our  proactive approach  on capacity  management means  seats 
flown for the winter period will be  about 1% to 2% down against the  previous 
year. We are also working on a range of cost saving initiatives over the next
12 months, targeting an annual saving of £2 per seat.



"APD  continues  to  be  a  burden  to  the  industry  and  one  that  impacts 
disproportionately on  Flybe compared  to  those with  significant  operations 
outside of the UK.  We are actively  lobbying for some  changes in this  area 
although we recognise this will be a long term project.



"While we recognise the  current challenges being faced  across the Group,  we 
are addressing those challenges and believe that our long term strategy is one
which will continue to rebalance our Group activities. We remain confident in
Flybe's future prospects."









      Enquiries:



      Flybe                                    Tel: +44 20 7457 2020
Jim French, Chairman & Chief Executive Officer
Andrew Knuckey, Chief Financial Officer
Niall Duffy, Head of PR and Public Affairs

                                             
      College Hill                             Tel: +44 20 7457 2020
Mark Garraway
Helen Tarbet



  Business review



      Overview



Through a  relentless  focus on  revenue  growth, cost  control  and  improved 
efficiency, Flybe  is continuing  to seek  to counter  the challenging  market 
conditions across the European regional aviation sector.



Flybe retains  its  focus  on  its  regional  business  model,  offering  high 
frequency services from convenient regional airports and serving markets  with 
limited surface transport alternatives. This  business model results in  high 
levels of  repeat  travel  across  business,  social  and  leisure  segments. 
Utilising modern, right-sized aircraft and matching capacity to demand,  Flybe 
is able to operate an efficient, punctual and reliable network.



In the UK,  Flybe is the  largest airline  brand in the  regional UK  domestic 
market with 52.6% passenger market share in the year ended September 2012,  up 
from 51.9% in the previous year. The Flybe brand held steady at 29.1%  market 
share of the total  UK domestic market (H1  2011/12 restated: 29.4%)  although 
the overall domestic market declined by 1.3% in aggregate for the year to date
to 20.2 million. The UK  division currently operates out  of 14 UK bases  and 
serves 73 airports in total over the UK and 12 other European countries.



The  Group  is  also  Europe's   largest  regional  airline.  Following   the 
acquisition of  Finnish Commuter  Airlines in  August 2011  in a  60:40  joint 
venture with  Finnair,  Flybe Finland  operated  16 regional  aircraft  in  H1 
2012/13 (increasing to 28  from 28 October  2012) on a  mix of commercial  and 
contract flying. On the basis of both the number of sectors or seats, it  has 
quickly  become  the   largest  domestic  airline   in  Finland.  There   are 
opportunities to  grow  further in  continental  Europe by  exporting  Flybe's 
established regional business model to  targeted markets, and seeking  further 
contract flying agreements with major  carriers. The market trend  supporting 
this growth strategy is strong,  as European flag carriers increasingly  focus 
on long-haul,  premium  business, and,  in  many cases,  look  to  restructure 
non-core regional and short-haul operations.



Flybe generates  additional  revenue from  its  Aviation Support  division,  a 
complementary MRO and training business  which services third parties as  well 
as Flybe.



      Group results



Revenues under management  grew 13.2%  to £396.3m  compared to  £350.2m in  H1 
2011/12. Group revenues were stable at £340.8m (H1 2011/12: £341.6m) and  the 
Group reported a loss before tax of £1.3m (H1 2011/12: profit of £14.3m). The
adverse variance in H1 2012/13  performance versus H12011/12 was largely  due 
to higher  fuel costs  not being  offset by  a corresponding  growth in  Group 
revenue, as adverse macro-economic conditions continued.



In H1 2012/13 the Group  reported an operating cash  outflow of £4.8m from  an 
inflow of £13.0m in H12011/12. This  was largely driven by the reduction  in 
operating profit  (before  joint  venture  results) in  the  period  of  £1.1m 
compared to a profit of £16.7m in  H1 2011/12, coupled with a net increase  in 
restricted cash in the period of £6.4m (H1 2011/12: £0.2m).



The Group's  balance sheet  held total  cash, including  restricted funds,  of 
£59.1m at 30 September 2012 (31 March 2012: £67.6m).



      Fleet



Flybe continues to renew  its fleet in order  to maximise efficiency and  best 
match capacity to demand.  Four Embraer E175 regional  jets were acquired  by 
Flybe UK during  H1 2012/13;  two on operating  lease and  two financed  using 
Flybe's loan  facility  with BNDES.  Two  more deliveries  are  scheduled  by 
31March 2013. Two Bombardier Q400 turboprops  left the fleet in H1  2012/13, 
generating a small profit on disposal.



There was no  change to Flybe  Finland's fleet  in H1 2012/13.  A further  12 
Embraer E190 regional jets  are now held  on operating leases  as part of  the 
contract flying  arrangements for  Finnair announced  on 12  October 2012  and 
which successfully commenced operation on 28October 2012.



Flybe's total fleet under management at 30 September 2012 totalled 85 aircraft
with an average age of 4.7 years (31 March 2012: 84 aircraft, average age  4.6 
years), as summarised below:



                                               Number of aircraft
                                            At                Net           At
                            Number of 31 March          movements 30 September
                                seats     2012          in period         2012
Flybe UK
Embraer E195 regional jet         118       14                  -           14
Embraer E175 regional jet          88        4                  4            8
Bombardier Q400 turboprop*         78       50                (3)           47
Flybe Europe
ATR 42 turboprop                   48        3                  -            3
ATR 72 turboprop                68-72       11                  -           11
Embraer E170 regional jet          76        2                  -            2
Total                                       84                  1           85
Held on operating lease                     74                  1           75
Owned and debt financed*                    10                  -           10
Total*                                      84                  1           85
Total seats in fleet                     6,960                           7,078
Average seats per aircraft                82.9                            83.3
Average   age   of    fleet 
(years)                                    4.6                             4.7



* 31 March 2012 position restated

      

On 28 October with the acquisition of a further 12 Embraer E190 regional  jets 
into Flybe Europe's operations, the total fleet under Flybe's management  rose 
to 97 operational  aircraft, of which  25 are deployed  under contract  flying 
arrangements.





      Divisional review



      Flybe UK



Flybe UK, the Group's UK based airline serving UK domestic and UK to  European 
business and leisure  destinations, delivered stable  revenues of £328.5m  (H1 
2011/12: £329.1m). Operating profit  at £2.0m (H1  2011/12: £14.5m) was  down 
predominantly due to  significant fuel  cost increases.  Although certain  UK 
domestic markets and UK to European leisure routes have performed well in what
has been a poor British summer, other markets, such as UK to European business
routes, continue to reflect the impact of the difficult economic environment.



As a result of the Group's careful capacity management programme, seats  flown 
decreased by  2.6% to6.2  million and  passengers decreased  by 3.4%  to  4.0 
million, resulting in  a 0.6ppt reduction  inloadfactor to 65.0%.  Business 
travellers represented circa 36% of Flybe UK's passengers (H12011/12:37%).



Maximising the efficient use of the fleet while reducing risk is a key element
of Flybe UK's strategy  and, under contract  flying arrangements for  Brussels 
Airlines, Flybe utilised  three Q400  aircraft (the  third aircraft  commenced 
flying on  2  September 2012)  with  a fourth  that  started in  operation  on 
28October 2012. We have planned to take a further four Q400s out of  service 
for this winter's flying programme.



In H1 2012/13,  and despite the  weak economic backdrop,  Flybe increased  its 
passenger yield by  0.9% to £76.77  per passenger with  passenger revenue  per 
seat steady at £49.90 (H12011/12:£49.88).



The launch of  Flybe UK's 'Making  flying better' campaign  in April 2012  has 
received very  positive  customer  feedback  and  'New  Economy'  sales  as  a 
percentage of online bookings are already trending at around 20%, well on  the 
way to the target of 30%. However, the removal of debit card fees as directed
by the  Office of  Fair Trading  ('OFT') has  presented a  considerable  extra 
financial burden to Flybe  UK this year.  Flybe is particularly  disappointed 
that other airlines  continue to apply  additional administration charges  not 
included in their headline fares, thus creating an unfair trading and  pricing 
environment.



In May 2012, following the decision to close BMI Baby, we announced that Flybe
UK would provide new services from East Midlands airport. We are pleased with
how the six new routes from that airport, involving the redeployment of  three 
existing aircraft, are developing as part of Flybe's commitment to the  region 
and the businesses that operate there.





      Flybe Europe



On 18 August 2011, Flybe entered into a 60:40 joint venture relationship  with 
Finland's flag  carrier, Finnair,  and  the JV  acquired the  regional  flying 
operations of Finnish Commuter Airlines. Now branded as Flybe Finland, it has
established itself  as  the  largest  domestic  airline  in  Finland  and  has 
generated revenues of £55.5m in H1  2012/13 (H12011/12: £8.6m - one month  of 
operations). Flybe  Finland operated  29 routes  on a  mix of  commercial  and 
contract flying in the Nordic and Baltic regions.



The commencement of expanded  contract flying operations  for Finnair from  28 
October 2012 that entailed the transfer on operating lease of 12E190 regional
jets  to  Flybe  Finland,  gives  Flybe  Finland  significant  critical  mass, 
increasing its  total  fleet to  28  aircraft (21  of  which are  deployed  in 
contract flying)  and taking  the  number of  routes  operated to  37.  Flybe 
Finland is expected to become profitable, on schedule, in 2013/14.



As previously set out,  Flybe believes that  selective acquisitions offer  the 
fastest and most viable route to profitability in the regional airline  sector 
in Europe while  partnership with major  airlines significantly reduces  entry 
risk. Flybe continues  selectively to explore  further opportunities in  other 
European regional aviation markets through acquisitions or by way of alliances
with flag carriers such as joint ventures, contract flying or codeshares. All
opportunities  must  meet  Flybe's  stringent  criteria  of  being   regional, 
affordable and digestible and able to provide a 15%+ profit before tax  return 
in the second full year post‑acquisition.





      Flybe Aviation Support



Flybe Aviation Support includes  state-of-the-art MRO and training  facilities 
in Exeter.



Flybe's regional MRO business is one of the largest in Europe and enables  the 
Group to provide  safe and timely  scheduled maintenance of  its own fleet  as 
well as to generate profits from its third party customers. This business  is 
directly affected by the  level of flying undertaken  by the regional  airline 
sector and for this reason saw lower  levels of third party activity than  had 
been expected in Q2  2012/13 as airlines continue  to restructure their  fleet 
plans and flying programmes.



Revenues during  the  first half  of  2012/13 were  down  4.4% to  £21.6m  (H1 
2011/12: £22.6m)  with an  operating  loss of  £0.9m  (H1 2011/12:  profit  of 
£0.4m). In  H1 2012/13,  the MRO  business produced  a total  of  275,000man 
hours, a decrease  of 10.1% on  H1 2011/12,  of which third  party hours  were 
179,000, a decrease of 3.8% on H1 2011/12.



The Group's strategy  is to  replicate the  third party  work profile  already 
achieved by the  MRO business  in Flybe's Training  Academy. This  officially 
opened in April 2011 with 26 classrooms, now has two flight simulators and has
shown strong revenue growth to £2.5m in H1 2012/13 (H12011/12 £1.5m).





      Board



At the time of the  Group's IPO in December 2010,  it was stated that  "Within 
the next three years, the Board and executive management intend to  facilitate 
an orderly separation  of the  Chairman and Chief  Executive Officer  roles." 
Accordingly, the Board has approved a timetable from the Nominations Committee
to commence a search,  both internally and  externally, for a  new CEO with  a 
view to completing  the process  during the  first half  of 2013  and for  the 
transition and handover to be  completed as soon as practicable  thereafter. 
Separately, the Board is pleased to announce that, at its request, Jim  French 
will continue as non-executive  Chairman for a three  year term following  the 
appointment of the new CEO.





      Summary and outlook



Flybe is currently operating in possibly the most challenging conditions since
its creation  as a  new-generation  regional airline  10  years ago.  The  UK 
domestic aviation  market has  seen passenger  numbers reduce  by 20.6%  since 
2007, UK APD increased  by 160% over  the same period and  fuel prices are  at 
record annual highs.



Flybe UK's forward passenger sales revenue for winter 2012/13 is ahead, as  at 
6 November  2012,  about  2.5%  year-on-year  while  its  capacity  management 
programme means seats flown for the winter  will be 1% to 2% down against  the 
previous year. Flybe UK  will continue to monitor  trends closely and  review 
its flying  programme to  ensure that  capacity remains  optimally matched  to 
demand.



In Europe,  the Group's  Finnish joint  venture is  poised for  a  significant 
improvement in profitability  with the arrival  on 28 October  2012 of the  12 
E170 aircraft that will serve Finnair's network under the new contract  flying 
arrangement. This adds substantial  scale while significantly de-risking  its 
business. Flybe also continues selectively to explore further opportunities in
other regional European markets  through acquisitions or  by way of  alliances 
with flag carriers such as joint ventures, contract flying or codeshares.



Demand in Flybe Aviation  Support's MRO business is  weaker than at this  time 
last year and we are undertaking measures to streamline the cost base of  this 
business.



Through a  relentless  focus on  revenue  growth, cost  control  and  improved 
efficiency,  Flybe  continues  to  seek  to  counter  the  challenging  market 
conditions across  the European  regional aviation  sector. The  Group has  a 
robust and flexible business model combined with clear and achievable plans to
address the current challenges and to drive long term future growth.



As a result  of the  above actions and  initiatives, and  despite the  current 
challenging trading  conditions, the  Board  remains confident  about  Flybe's 
prospects.



  Financial review



      Summary



Flybe's results  for the  six  months to  30  September 2012  demonstrate  the 
importance of achieving increasing revenues in a time when demand is  dampened 
by the growing burden of APD and the Group's cost burden, primarily related to
fuel, increases.  Flybe's  passenger  numbers  under  management  plus  those 
transported  under  contract  flying  arrangements  in  the  Group's  combined 
operations have grown by 12.5% to 4.8million from 4.2million with passengers
flown by Flybe Finland now accounting for 14.8% of the total.



At 30 September 2012, Flybe  had net assets of  £85.4m, total cash of  £59.1m, 
unrestricted cash of  £27.9m and net  debt (i.e. total  borrowings less  total 
cash) of £50.0m.



The results  of  Flybe Finland,  our  60:40 joint  venture  relationship  with 
Finnair, are  equity  accounted  rather  than  included  in  the  line-by-line 
consolidated figures below. In H12012/13, Flybe Finland is in its first full
year of  operations  as  it had  only  one  month of  trading  (following  the 
acquisition of what was then Finnish Commuter Airlines in August 2011) in  the 
H12011/12 period.



                                    H1 2012/13  H1 2011/12 Change

                                            £m          £m      %

                                              (restated)*      
Total revenue under management           396.3       350.2   13.2
Group revenue                            340.8       341.6  (0.2)
EBITDAR*                                  46.7        61.4 (23.9)
Underlying (loss)/profit before tax      (2.0)        14.3    N/M
(Loss)/profit before tax                 (1.3)        14.3    N/M
(Loss)/profit after tax                  (1.3)        14.6    N/M



* H1 2011/12 restated  to exclude £(0.5m) share  of joint venture loss  from 
EBITDAR.



Group revenue decreased by £0.8m (or 0.2%), EBITDAR fell by £14.7m (or  23.9%) 
to £46.7m, and the Group reported an  underlying loss before tax of £2.0m  (H1 
2011/12: profit of £14.3m).



Flybe's EBITDAR in H1 2012/13 and H1 2011/12 is calculated as follows:



                                              H1 2012/13 H1 2011/12 Change

                                                      £m         £m      %

                                                        (restated)      
Operating profit before joint venture results        1.1       16.7 (93.4)
Depreciation and amortisation*                       6.9        5.9   16.9
Aircraft rental charges                             38.7       38.8  (0.3)
EBITDAR                                             46.7       61.4 (23.9)



* Excludes depreciation on maintenance assets set up in accordance with IFRS
requirements





Set out below is  a reconciliation of (loss)/profit  before tax to  underlying 
figures:



                                                   H1 2012/13 H1 2011/12

                                                           £m         £m
(Loss)/profit before tax                                (1.3)       14.3
Add back of revaluation gain on USD aircraft loans      (0.7)          -
(Loss)/profit before tax - underlying                   (2.0)       14.3





Flybe UK

      Revenue



Revenue was stable at  £328.5.m in H1 2012/13,  versus £329.1m reported in  H1 
2011/12.



Seat capacity  reduced from  6.4 million  in H1  2011/12 to  6.2 million  with 
sectors flown decreasing to 72,700 from the 75,500 flown in H1 2011/12.



Passenger numbers were  down by  3.6% at  4.0 million,  representing a  0.6ppt 
reduction in load factor to 65.0%.



                              H1 2012/13 H1 2011/12 Change

                                      £m         £m      %

                                        (restated)      
Passenger revenue                  310.3      318.4  (2.5)
Contract flying revenue              4.5          -    N/M
Revenue from other activities       13.7       10.7   28.0
Total revenue                      328.5      329.1  (0.2)



Total passenger yield was up  0.9% to £76.77 from  £76.06 in H1 2011/12,  with 
overall improvements in  yield being offset  by the impact  of the removal  of 
debit card charging as directed by the OFT.



This improvement in yield per passenger  offset the reduction in load  factor, 
highlighted above, resulting in passenger revenue per seat remaining stable at
£49.90 (H1 2011/12:  £49.88), and  total passenger  revenues down  by 2.6%  at 
£310.3m (from £318.4m).



Contract flying  revenue from  the  three Q400  aircraft flying  for  Brussels 
Airlines during H1 2011/12 totalled  £4.5m (H12011/12: £nil). Four  aircraft 
have been flying for Brussels Airlines since 28 October 2012.



Revenue from other activities, including charter and cargo revenue and  income 
from the Loganair  franchise in  H12012/13, totalled £13.7m,  an increase  of 
28.0% on  H1 2011/12's  revenues of  £10.7m, due  primarily to  a  significant 
increase in charter revenue.







      Operating costs



                                                  
                                                                 £ per seat at
                           H1 2012/13         H1 2011/12     constant currency
                            £m £ per seat      £m £ per seat   and fuel price*
Staff costs             (46.0)     (7.42)  (42.7)     (6.67)            (6.67)
Net airport costs, en
route charges and
ground operations      (111.5)    (17.98) (113.9)    (17.80)           (17.53)
Aircraft ownership and
maintenance costs       (75.1)    (12.11)  (75.2)    (11.76)           (11.45)
Marketing and
distribution costs      (12.7)     (2.05)  (12.4)     (1.94)            (1.91)
Other operating costs   (12.1)     (1.95)  (12.6)     (1.94)            (1.94)
Operating costs
excluding fuel         (257.4)    (41.51) (256.8)    (40.11)           (39.50)
Fuel                    (68.6)    (11.06)  (55.9)     (8.73)           (10.59)
Operating costs        (326.0)    (52.57) (312.7)    (48.84)           (50.09)



* Constant currency is calculated for the H1 2011/12 period by applying  the 
effective exchange rates that prevailed  for reporting the H1 2012/13  results 
of $1.61 and €1.25 and  constant fuel price is  calculated for the H1  2011/12 
period by applying the effective blended rate  paid for jet fuel per tonne  in 
H1 2012/13.



Operating costs excluding fuel increased by 0.2% from £256.8m to £257.4m.  On 
a per  seat basis,  these costs  increased  by 3.5%  from £40.11  to  £41.51. 
Allowing for the use of aircraft and crew on contract flying operations (which
reduced the number  of scheduled  seats flown),  operating costs  per seat  on 
scheduled services, excluding fuel, increased by less than inflation.



Fuel costs increased by 22.7% from £55.9m to £68.6m and, on a per seat  basis, 
the increase was 26.7% from £8.73 to £11.06.





      Fuel



Fuel is a  significant variable cost  which has a  material impact on  Flybe's 
results. A variety of external factors, such as changes in supply and  demand 
for oil and oil-related products, and the role of speculators and funds in the
futures markets, has played a part in both pushing up aviation fuel prices and
making them highly volatile.  During the course of  H1 2012/13, the price  of 
jet fuel has traded between $862 and $1,116 per tonne.



During H1 2012/13, Flybe UK used some 101,000 tonnes of jet fuel. The average
market price during the period  was $1,008 per tonne  with the Group paying  a 
blended rate (net  of hedges)  of $1,008  per tonne.  Including 'into  plane' 
costs, Flybe UK's fuel costs of £68.6m represent an all-in cost of  $1,094per 
tonne during H1 2012/13.  Fuel burn was 16.2  kgs per seat (H12011/12:  15.9 
kgs per seat).



Flybe UK operates a policy of managing fuel price volatility by entering  into 
derivative contracts representing a portion (typically between 60% and 90%) of
its aviation fuel requirements up to 12months forward. The intention of this
programme is to provide a significant element of certainty over its fuel costs
for any forthcoming IATA season. As at 6 November 2012, 84% of the division's
forecast fuel burn for H2 2012/13 was hedged at an average price of $1,015 per
tonne, and 59% of Flybe UK's expected fuel burn on H1 2013/14 was hedged at an
average price of $980 per tonne.



      Carbon



Flybe UK is required to surrender permits covering its carbon dioxide  (CO[2]) 
emissions for each calendar year. Under the European ETS, a percentage of the
annual total emissions are covered by free allocations. The remaining permits
must be purchased.



                                         Calendar year 2012 Calendar year 2013
Carbon dioxide
Forecast CO[2] emissions ('000 tonnes)                  579                591
Less: Free allocation ('000 tonnes)                   (275)              (260)
Remaining requirement ('000 tonnes)                     304                331
% of remaining  requirement (i.e.  after 
free allocation) hedged                                 86%                14%
Average hedged permit price                           €6.48              €7.30
Total forecast requirement covered  (via 
free allocation and hedges)                             92%                52%

      



      Other operating costs



Staff costs increased by 7.7%  primarily due to awarding  the final year of  a 
three year pilot pay deal  with effect from April  2012, the impact of  annual 
increments as a result  of low attrition and  a higher proportion of  regional 
jets to turboprops in the fleet.



Net airport costs, en route charges and ground operations decreased largely in
line with the slightly reduced flying programme.



Aircraft ownership  and maintenance,  marketing  and distribution,  and  other 
operating costs were flat year on year.





      Foreign exchange



The Group manages  its foreign  exchange positions  based on  its net  foreign 
currency exposure. As regards 'net'  foreign currency exposure (i.e.  foreign 
currency expenditure  less  associated revenues),  Flybe  UK currently  has  a 
relatively small net exposure  to the Euro but  has to purchase a  significant 
volume of US dollars to settle expenditure on items such as fuel,  maintenance 
and aircraft  operating  leases. Flybe  generates  no significant  US  dollar 
revenues and  actively  manages  its  US dollar  position  through  a  foreign 
exchange forward purchase programme similar to that outlined for fuel. As  at 
6November 2012, 87% of Flybe UK's  anticipated US dollar requirements for  H2 
2012/13 were hedged  at an  average exchange  rate of  $1.59, and  60% of  its 
forecast US  dollar requirements  for  H12013/14 were  hedged at  an  average 
exchange rate of $1.58.



The table below sets out  for each of the periods  under review Flybe UK's  US 
dollar requirements,  forward derivative  instruments  taken out  and  blended 
exchange rate achieved:



                                         H1 2012/13 H1 2011/12
US dollar
Foreign currency requirement                  $202m      $183m
Proportion hedged at beginning of period        78%        86%
Effective exchange rate                       $1.61      $1.56





      Flybe Europe



In this full six month period of operations, Flybe Finland's revenue increased
to £55.5m in H1  2012/13, versus £8.6m  reported in H1  2011/12 (one month  of 
operations).



Contract flying generated £36.7m  of revenue, up from  the £5.8m generated  in 
the month after acquisition  in 2011. Further  significant revenue growth  is 
expected in this area with the  arrival of 12E190 jets flying under  contract 
for Finnair from 28 October 2012. Overall, this should see Flybe Finland move
to profitability from 2013/14 onwards.



Scheduled seat capacity provided by  Flybe Finland increased from 0.1  million 
in H1 2011/12 to  0.5million with sectors  flown at 7,700  up from the  1,300 
flown in the short  period of ownership  in H12011/12. Scheduled  passengers 
totalled 0.2 million, representing a 2.8ppt increase in load factor to 42.2%.



                                              H1 2012/13 H1 2011/12*
                                                      £m          £m
Flybe Finland joint venture
Passenger revenue                                   16.4         2.5
Contract flying revenue                             36.7         5.8
Revenue from other activities                        2.4         0.3
Total revenue                                       55.5         8.6
Fuel                                              (11.3)       (1.5)
Other costs                                       (48.7)       (7.7)
Total costs                                       (60.0)       (9.2)
Loss before tax                                    (4.5)       (0.6)
Tax credit                                           1.1           -
Loss after tax                                     (3.4)       (0.6)
60% share of Flybe Finland joint venture loss      (2.1)       (0.5)
Other net costs including interest                 (0.3)       (0.1)
Segment result - Flybe Europe                      (2.4)       (0.6)



* For the period from acquisition on 18 August 2011 to 30 September 2012.





      Flybe Aviation Support



                                         H1 2012/13 H1 2011/12 Change

                                                 £m         £m      %
Maintenance, repair and overhaul ('MRO')       19.1       21.1  (9.5)
Training Academy                                2.5        1.5   66.7
Total revenue                                  21.6       22.6  (4.4)
Operating costs                              (22.5)     (22.2)    1.4
Segment result - Flybe Aviation Support       (0.9)        0.4    N/M



After an encouraging  Q1 2012/13, Flybe's  MRO operation saw  lower levels  of 
third party activity than had been expected in Q2 2012/13 due to the impact of
the lower levels of aircraft utilisation across the regional aviation  sector, 
particularly in Europe, leading to reduced requirements for maintenance.



In H1  2012/13, the  MRO business  produced a  total of  275,000man hours,  a 
decrease of 10.1% on  H12011/12, of which third  party hours were 179,000,  a 
decrease of 3.8% on H1 2011/12.



The Training Academy has seen improvements in utilisation and growth in  third 
party revenues in the year to date.  In particular the Q400 simulator is  now 
often fully utilised with activity building in the E‑series simulator.





      Group costs



Group costs  of £1.8m  were up  by 20.0%  on H1  2011/12 £1.5m  due to  salary 
increases reported in the March 2012  audited accounts and the increased  size 
of the Board.





      Group - overall results



The Group made an operating profit before joint venture results of £1.1m.



After joint venture results, the Group's operating loss was £1.0m (H1 2011/12:
operating profit £16.2m).



The Group  incurred net  finance costs  of £0.6m  (2011/12: £0.8m)  and  other 
gains/(losses) of £0.3m (2011/12:£(1.1)m), leaving a loss before tax for  the 
period of £1.3m (H12011/12: profit of £14.3m).



After a tax  credit of £nil  (H1 2011/12:  £0.3m), the Group  reported a  loss 
after tax for H1 2012/13 of £1.3m (H1 2011/12: profit of £14.6m).





      EPS and dividends



Basic and diluted (see note 7 to the condensed financial statements) loss  per 
share for H1  2012/13 was (1.7)p,  compared with basic  earnings per share  of 
19.4p and diluted earnings per share of 19.1p in H12011/12.



No dividends were paid  or proposed in either  the current or prior  financial 
period.





      Cash flow

                                                  H1 2012/13 H1 2011/12 Change

                                                          £m         £m     £m
Net cash (outflow)/inflow from operating
activities                                             (4.8)       13.0 (17.8)
Net capital expenditure after disposal proceeds       (22.2)        7.5 (29.7)
Net proceeds from new loans/(repayments of
borrowings)                                             12.9     (19.2)   32.1
Acquisition of joint venture interest                  (0.3)     (17.2)   16.9
Net interest paid                                      (0.6)      (1.5)    0.9
Net decrease in cash and cash equivalents             (15.0)     (17.4)    2.4
Cash and cash equivalents at beginning of period        42.9       87.7 (44.8)
Cash and cash equivalents at end of period              27.9       70.3 (42.4)
Restricted cash                                         31.2       18.1   13.1
Total cash                                              59.1       88.4 (29.3)



In H1 2012/13 the Group reported  an operating cash outflow of £4.8m  compared 
with an  inflow of  £13.0m in  H12011/12.  This was  largely driven  by  the 
reduction in operating profit (before joint venture results) in the period  of 
£1.1m compared  to a  profit  of £16.7m  in H1  2011/12,  coupled with  a  net 
increase in restricted cash in the period of £6.4m (H1 2011/12: £0.2m).



The largest  movements in  net capital  expenditure were  in relation  to  the 
acquisition of two E175 aircraft, and the disposal of two Q400 aircraft during
the period, with net proceeds from new loans also primarily relating to  these 
transactions.



As at 30  September 2012, there  were four aircraft  pre-delivery deposits  in 
place totalling £9.3m against two deliveries  due in H22012/13 and two in  H1 
2013/14 (five  such deposits  were in  place at  30September 2011,  totalling 
£13.8m).



      Balance sheet



                                         30 Sept 2012 31 Mar 2012 Change

                                                   £m          £m     £m
Airport landing slots                             8.5         8.5      -
Aircraft                                        155.5       136.9   18.6
Other property, plant and equipment              26.1        25.2    0.9
Interest in joint ventures                       14.4        16.2  (1.8)
Net debt                                       (50.0)      (29.7) (20.3)
Derivative financial instruments                (3.6)         3.9  (7.5)
Other working capital - net                    (66.0)      (71.8)    5.8
Deferred taxation                                 4.9         3.1    1.8
Other non-current assets and liabilities        (4.4)       (2.9)  (1.5)
Net assets                                       85.4        89.4  (4.0)



The value  of airport  landing  slots remained  unchanged with  no  additions, 
disposals  or  impairments.  The  £155.5m  of  net  book  value  of  aircraft 
represents owned aircraft, engines and aircraft modifications.



On 18 August 2011, Flybe and Finnair entered into a 60:40 joint venture  which 
completed the  acquisition of  Finnish Commuter  Airlines Oy  (now renamed  as 
Flybe Finland Oy) and also involved  Flybe acquiring a 46.3% stake in  Finnish 
Aircraft Maintenance Oy (collectively, 'Flybe Nordic'). With the  acquisition 
of a further 13.7%  interest in Finnish Aircraft  MaintenanceOy in June  2012 
for £0.3m,  this company  now operates  as  a part  of Flybe  Finland.  After 
Flybe's share of joint venture losses  of £(2.1m) in H1 2012/13, the  carrying 
value of the interest in joint ventures at 30 September 2012 stood at £14.4m.



Net debt at  30 September 2012  of £50.0m  increased from the  position at  31 
March 2012 of £29.7m  due to the  low level of UK  profits and the  associated 
operating cash  flow generated  in  the period  being outweighed  by  aircraft 
purchases. Borrowings increased by £11.8m to £109.1m as new loans  associated 
with the acquisition  of two new  aircraft exceeded the  borrowings repaid  on 
existing loans and on two other aircraft that were disposed of at a small book
profit.



Net debt at 30 September 2012 included restricted cash of £31.2m (£24.7m at 31
March 2012) which represents, predominantly,  cash deposits held in favour  of 
aircraft owners to secure operating lease arrangements and cash held with  the 
Group's bankers  to  facilitate  guarantee arrangements  with  card  acquiring 
facilities and other suppliers. Net negative other working capital  decreased 
from £71.8m to £66.0m primarily due  to the seasonal fluctuations in  advanced 
receipts from customers.



Shareholders' equity decreased by £4.0m driven by the reduction in derivatives
fair value  of £2.7m  and the  loss in  the period  of £1.3m.  This does  not 
include the defined benefit  pension scheme surplus of  £1.8m at 30  September 
2012 (31 March 2012: £1.3m). The  scheme is closed to future benefit  accrual 
and the surplus has not been recognised  as the assets cannot be recovered  by 
the Group.





      Related party transactions



Related party transactions are disclosed in note 16 to the condensed financial
statements. Other than the acquisition of a further 13.7% holding in  Finnish 
Aircraft MaintenanceOy for £0.3m, there  have been no material related  party 
transactions since the last annual report.





      Going concern



Flybe's business activities, together  with the factors  likely to affect  its 
future development,  performance and  position, are  set out  in the  business 
review on pages 3 to 6. The  financial position of the Group, its cash  flows 
and liquidity position are described in the financial review section above.



The Directors have considered the sensitivities presented by current  economic 
conditions in the aviation sector in relation to passenger volumes and yields,
fuel prices, foreign exchange, route selection and investment in new  aircraft 
and will assess any actions they feel are necessary.



Flybe has free cash  balances of £27.9m,  has met all  of its operating  lease 
commitments and debt repayment obligations as they have fallen due and  passed 
all its financial covenants.



The Directors have prepared a trading  and cash flow forecast which  indicates 
that Flybe will be able  to trade using operating cash  flows for at least  12 
months from the date  of signing this  interim statement and  will be able  to 
meet  its  liabilities,  including   operating  lease  commitments  and   debt 
repayments, as they become due.



The Directors believe that the risks  and uncertainties of the Flybe  business 
as highlighted  on pages  16 and  17 can  be addressed,  in large  part, by  a 
proactive approach  on  yield and  capacity  management, the  availability  of 
contract flying opportunities with other airlines  and a range of cost  saving 
initiatives  over  the  next  12  months  that  will  lead,  collectively,  to 
improvements in the profit performance of the business.



The Directors have a reasonable expectation that Flybe has adequate  resources 
to continue in operational  existence for the  foreseeable future. Thus  they 
continue to adopt  the going concern  basis of accounting  in preparing  these 
condensed financial statements.



  Risks and uncertainties



This section describes the principal risks and uncertainties which may  affect 
Flybe's business, financial results and  prospects. The Board has  determined 
that these continue  to be the  principal risks and  uncertainties facing  the 
Group for  the remaining  six months  of  the year.  Further details  on  the 
principal risks, uncertainties and mitigations can be found on pages 27 to  31 
of the Group's annual  report for the  year ended 31 March  2012 and which  is 
available       for       download       from       its       website       at 
http://www.flybe.com/en/corporate/investors.





      Safety and security

à Failure to prevent a safety or security-related incident including terrorist
threat, or attacks  from either  internal or  external sources  or to  respond 
adequately to a safety or security-related event.



      External risks



        Macroeconomic environment

à Flybe is exposed to sustained deterioration in general economic conditions.

à Flybe is exposed to a reduction in UK and Finnish domestic air travel.



        Competition

à Flybe operates in a highly competitive transport market.



        Regulation

à Regulatory changes in the airline industry may have an adverse impact on  an 
airline's costs, operational flexibility,  marketing strategy, business  model 
and ability to expand.

à Flybe  is exposed  to  various regulators  across  its network.  This  will 
increase as Flybe expands its operations in other countries.



        Duties and taxes

à Airlines may be adversely affected by increases in Air Passenger Duty in the
UK and its equivalent in other countries.



        Environment

à Airlines may be  adversely affected by any  future amendment with regard  to 
regulation of emissions trading and other environmental laws and regulations.

à Flybe  is  exposed  to  negative environmental  perception  of  the  airline 
industry.



      Implementing growth strategy

à Flybe may not be successful in implementing its growth strategy.

à Costs will be incurred in developing  new routes and new routes proposed  by 
Flybe may not be profitable.

à Flybe's on-going joint venture arrangement is not successful.



      Reputation

à Flybe  is  exposed  to  an event  damaging  its  fleet  reputation,  company 
reputation or brand.

à Flybe is  exposed to the  effects of extraneous  events, such as  epidemics, 
natural occurrences  or  disasters  (such  as  severe  weather  or  ash  cloud 
disruption).





      IT systems and the Internet

à Flybe  is  heavily dependent  on  its information  technology  systems,  the 
ongoing development  of  those  systems,  and  the  internet  to  operate  its 
business.

à Flybe operates an e-commerce business and deals with a significant amount of
personal and business information.



      People

à Flybe is dependent on good industrial relations, across all its regions with
a workforce that is, in part, unionised.



      Supplier

à  Flybe  is  exposed  to   the  failure  or  non-performance  of   commercial 
counterparties as well  as requiring  the services  of key  suppliers such  as 
airports, air traffic control systems and fuel supply companies.



      Financial risks

à Flybe is exposed  to risks associated with  fluctuations in fuel prices  and 
foreign exchange rates.

à Flybe is exposed to the unavailability of suitable financing.

à Flybe is reliant on the continuing performance of counter-parties.

à The residual value of assets could be materially less than budgeted disposal
costs.





  Statement of directors' responsibilities

Six months ended 30 September 2012





      Responsibility statement



We confirm that to the best of our knowledge:

(a)  the  condensed  set  of  financial  statements  has  been  prepared  in 
accordance with IAS 34 'Interim Financial Reporting';



(b) the interim management report includes a fair review of the  information 
required by DTR 4.2.7R  (indication of important events  during the first  six 
months and description of principal risks and uncertainties for the  remaining 
six months of the year); and



(c) the interim management report includes a fair review of the  information 
required by  DTR  4.2.8R  (disclosure of  related  parties'  transactions  and 
changes therein).





By order of the Board















Jim French CBE Andrew Knuckey

Chairman and Chief Executive Officer Chief Financial Officer



8 November 2012 8 November 2012





  Independent review report to Flybe Group plc

Six months ended 30 September 2012





We have been engaged by the Company  to review the condensed set of  financial 
statements in the  half-yearly financial report  for the six  months ended  30 
September 2012 which  comprises the condensed  consolidated income  statement, 
the condensed consolidated  statement of comprehensive  income, the  condensed 
consolidated statement  of  changes  in  equity,  the  condensed  consolidated 
balance sheet,  the condensed  consolidated cash  flow statement  and  related 
notes 1 to 16. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent misstatements
or material  inconsistencies with  the  information in  the condensed  set  of 
financial statements.



This report is  made solely to  the Company in  accordance with  International 
Standard on  Review  Engagements (UK  and  Ireland) 2410  "Review  of  Interim 
Financial Information  Performed by  the Independent  Auditor of  the  Entity" 
issued by the Auditing Practices Board. Our work has been undertaken so  that 
we might state to the company those matters we are required to state to it  in 
an independent review report and for no other purpose. To the fullest  extent 
permitted by law, we  do not accept or  assume responsibility to anyone  other 
than the Company, for our review work, for this report, or for the conclusions
we have formed.





      Directors' responsibilities



The half-yearly  financial  report is  the  responsibility of,  and  has  been 
approved by, the directors. The  directors are responsible for preparing  the 
half-yearly  financial   report  in   accordance  with   the  Disclosure   and 
Transparency Rules of the United Kingdom's Financial Services Authority.



As disclosed  in note  2, the  annual financial  statements of  the group  are 
prepared in  accordance with  IFRSs as  adopted by  the European  Union.  The 
condensed set of financial statements  included in this half-yearly  financial 
report has been prepared in accordance with International Accounting  Standard 
34 "Interim Financial Reporting", as adopted by the European Union.





      Our responsibility



Our responsibility is to express to the Company a conclusion on the  condensed 
set of financial statements in the  half-yearly financial report based on  our 
review.





      Scope of Review



We conducted our review  in accordance with  International Standard on  Review 
Engagements (UK and  Ireland) 2410, "Review  of Interim Financial  Information 
Performed by the  Independent Auditor of  the Entity" issued  by the  Auditing 
Practices Board for use in the  United Kingdom. A review of interim  financial 
information consists of making inquiries, primarily of persons responsible for
financial and accounting  matters, and  applying analytical  and other  review 
procedures. A review is substantially less in scope than an audit conducted in
accordance with  International  Standards on  Auditing  (UK and  Ireland)  and 
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit.  Accordingly, 
we do not express an audit opinion.





      Conclusion



Based on our  review, nothing  has come  to our  attention that  causes us  to 
believe that  the condensed  set of  financial statements  in the  half-yearly 
financial report for the six months  ended 30 September 2012 is not  prepared, 
in all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union and the Disclosure and Transparency  Rules 
of the United Kingdom's Financial Services Authority.











      Deloitte LLP

Chartered Accountants and Statutory Auditor

Reading, United Kingdom





8 November 2012



Notes: A review does not provide assurance on the maintenance and  integrity 
of the website, including controls used to achieve this, and in particular  on 
whether any changes may have occurred to the financial information since first
published. These  matters are  the  responsibility of  the directors  but  no 
control procedures can provide absolute assurance in this area.



  Consolidated income statement

Six months ended 30 September 2012





                                                 Six months ended 30 September
                                                       2012 £m      2011 £m
                                                                            
                                            Note   (Unaudited)  (Unaudited)
Total revenue under management               3           396.3        350.2 
Less: Joint venture revenue                             (55.5)        (8.6) 
                                                                            
GROUP REVENUE                                            340.8        341.6 
Consisting of:                                                              
Passenger revenue                                        310.3        318.4 
Revenue from other activities                             30.5         23.2 
                                                         340.8        341.6 
                                                                            
                                                                            
Staff costs                                             (63.2)       (59.9) 
Fuel                                                    (68.6)       (55.9) 
Net airport and en route charges                        (68.1)       (68.2) 
Ground operations                                       (43.4)       (45.7) 
Maintenance                                             (20.6)       (21.0) 
Depreciation and amortisation                            (6.9)        (5.9) 
Aircraft rental charges                                 (38.7)       (38.8) 
Marketing and distribution costs                        (12.9)       (12.7) 
Other operating gains                                      1.3          1.7 
Other operating expenses                                (18.6)       (18.5) 
Operating  profit   before  joint   venture                                 
results                                                    1.1         16.7
                                                                            
Share of joint venture loss                              (2.1)        (0.5) 
OPERATING (LOSS)/PROFIT                                  (1.0)         16.2 
                                                                            
Investment income                                          0.5          0.3 
Finance costs                                            (1.1)        (1.1) 
Other gains and losses                                     0.3        (1.1) 
(LOSS)/PROFIT BEFORE TAX                                 (1.3)         14.3 
                                                                            
Tax credit                                   5               -          0.3 
(LOSS)/PROFIT FOR THE PERIOD                             (1.3)         14.6 
                                                                            
(Loss)/earnings per share:                                                  
Basic                                        7           (1.7)         19.4 
Diluted                                      7           (1.7)         19.1 



  Consolidated statement of comprehensive income

Six months ended 30 September 2012



                                                 Six months ended 30 September
                                                        2012 £m        2011 £m

                                                    (Unaudited)    (Unaudited)
(Loss)/profit for the financial period                    (1.3)           14.6
Items that will not  be reclassified to  profit 
or loss:
Actuarial  loss  on  defined  benefit   pension 
scheme                                                    (0.2)          (0.2)
Items that may be reclassified subsequently to
profit or loss:
Losses arising during the period on cash flow
hedges                                                    (3.0)          (2.0)
Reclassification of losses on cash flow hedges
included in the income statement                          (2.6)         (11.7)
Deferred tax arising on cash flow hedges                    1.7            3.6
Foreign exchange translation differences                    1.2              -
                                                          (2.7)         (10.1)
Other comprehensive loss for the period                   (2.9)         (10.3)
Total  comprehensive   (loss)/income  for   the 
period                                                    (4.2)            4.3



  Consolidated statement of changes in equity

Six months ended 30 September 2012



                                                      Capital
                           Share Hedging  Other
                    Share                          redemption            Total
                          premium reserve reserves             Retained
                  capital                             reserve (deficit) equity
                                
                       £m      £m      £m       £m   £m        £m     £m
Balance at 1
April 2012            0.7    60.6     3.5      6.7       22.5     (4.6)   89.4
Loss for the
period                  -       -       -        -          -     (1.3)  (1.3)
Other
comprehensive
expense for the
period                  -       -   (2.7)        -          -     (0.2)  (2.9)
Equity‑settled
share‑based
payment
transactions            -       -       -        -          -       0.2    0.2
Balance at
30September 2012
(unaudited)           0.7    60.6     0.8      6.7       22.5     (5.9)   85.4





                                                       Capital

                     Share   Share Hedging    Other redemption Retained  Total

                   capital premium reserve reserves    reserve earnings equity

                        £m      £m      £m       £m         £m       £m     £m
Balance at 1 April
2011                   0.7    60.6    15.7      6.7       22.5      1.7  107.9
Profit   for   the 
period                   -       -       -        -          -     14.6   14.6
Other
comprehensive
expense  for   the 
period                   -       -  (10.1)        -          -    (0.2) (10.3)
Equity‑settled
share‑based
payment
transactions             -       -       -        -          -      0.3    0.3
Balance         at 
30September  2011 
(unaudited)            0.7    60.6     5.6      6.7       22.5     16.4  112.5







  Consolidated balance sheet

At 30 September 2012



                                            30 September 2012
                                                              31 March 2012 £m
                                       Note     £m(Unaudited)        (Audited)
NON-CURRENT ASSETS
Intangible assets                                        10.2             10.1
Property, plant and equipment           8               181.6            162.1
Interests in joint ventures             11               14.4             16.2
Other non-current assets                                 37.2             40.0
Restricted cash                                           8.3              7.9
Deferred tax asset                                        9.5              8.6
                                                        261.2            244.9
CURRENT ASSETS
Inventories                                               7.7              6.6
Trade and other receivables                              89.7             98.5
Cash and cash equivalents                                27.9             42.9
Restricted cash                                          22.9             16.8
Derivative financial instruments                            -              5.3
Assets held for sale                                      0.3              0.3
                                                        148.5            170.4
TOTAL ASSETS                                            409.7            415.3
CURRENT LIABILITIES
Trade and other payables                               (97.7)           (89.0)
Deferred income                                        (41.0)           (63.2)
Borrowings                              9              (12.9)           (21.3)
Provisions                                             (25.0)           (25.0)
Derivative financial instruments                        (3.5)            (1.3)
                                                      (180.1)          (199.8)
NON-CURRENT LIABILITIES
Borrowings                              9              (96.2)           (76.0)
Deferred tax liabilities                                (4.6)            (5.5)
Provisions                                             (31.8)           (32.1)
Deferred income                                        (11.5)           (12.4)
Derivative financial instruments                        (0.1)            (0.1)
                                                      (144.2)          (126.1)
TOTAL LIABILITIES                                     (324.3)          (325.9)
NET ASSETS                                               85.4             89.4
EQUITY ATTRIBUTABLE TO  OWNERS OF  THE 
COMPANY
Share capital                           10                0.7              0.7
Share premium account                                    60.6             60.6
Hedging reserve                                           0.8              3.5
Other reserves                                            6.7              6.7
Capital redemption reserve                               22.5             22.5
Retained deficit                                        (5.9)            (4.6)
TOTAL EQUITY                                             85.4             89.4

  Consolidated cash flow statement

Six months ended 30 September 2012



                                            Six months ended 30 September
                                        2012 (Unaudited)£m 2011 (Unaudited) £m
Cash flows from operating activities
(Loss)/profit for the period                         (1.3)                14.6
Adjustments for:
Depreciation,     amortisation      and 
impairment                                             6.9                 7.6
Investment income                                    (0.5)               (0.3)
Finance costs                                          1.1                 1.8
Other net gains                                      (1.7)                   -
Gain on  sale  of property,  plant  and 
equipment and assets held for sale                       -               (0.8)
Equity-settled   share-based    payment 
expenses                                               0.2                 0.3
Joint venture result                                   2.1                 0.5
Taxation                                                 -               (0.3)
                                                       6.8                23.4
Increase in restricted cash                          (6.4)               (0.2)
Decrease/(increase) in trade and  other 
receivables                                           10.0              (10.1)
Increase in inventories                              (1.2)               (1.5)
Decrease in trade and other payables                (13.7)               (4.9)
Decrease in assets held for sale                         -                 0.1
(Decrease)/increase in  provisions  and 
employee benefits                                    (0.3)                 6.2
                                                    (11.6)              (10.4)
Tax paid                                                 -                   -
Net   cash    flows   from    operating 
activities                                           (4.8)                13.0
Cash flows from investing activities
Proceeds from sale  of property,  plant 
and equipment                                         10.6                48.2
Decrease in pre-delivery deposits                      4.2                 0.6
Interest received                                      0.5                 0.3
Acquisition  of  property,  plant   and 
equipment                                           (36.5)              (41.1)
Capitalised      computer      software 
expenditure                                          (0.5)               (0.2)
Acquisition of joint venture interest                (0.3)              (17.2)
Net   cash    flows   from    investing 
activities                                          (22.0)               (9.4)
Cash flows from financing activities
Proceeds from new loans                               27.8                31.4
Interest paid                                        (1.1)               (1.8)
Repayment of borrowings                             (14.9)              (50.6)
Net   cash    flows   from    financing 
activities                                            11.8              (21.0)
Net   decrease   in   cash   and   cash 
equivalents                                         (15.0)              (17.4)
Cash and cash equivalents at  beginning 
of period                                             42.9                87.7
Cash and  cash  equivalents at  end  of 
period                                                27.9                70.3

  

  

  Notes to the condensed set of financial statements

Six months ended 30 September 2012





1. GENERAL INFORMATION



The information for the year ended 31 March 2012 does not constitute statutory
accounts as defined in section  434 of the Companies Act  2006. A copy of  the 
statutory accounts  for that  year  has been  delivered  to the  Registrar  of 
Companies.  The  auditor  reported  on   those  accounts:  their  report   was 
unqualified, did not draw attention to any matters by way of emphasis and  did 
not contain a statement under section 498(2) or (3) of the Companies Act 2006.



The presentation of  revenue in the  income statement has  been summarised  in 
these interim financial statements to present passenger revenue only (the  sum 
of ticket and ancillary revenue) in order to better reflect the experience  of 
the business after the introduction of the new ticket structure in April  2012 
as part of the Making flying better programme. In addition, costs, assets and
liabilities have  been reallocated  to reflect  the new  divisional  structure 
first reported on for the  year to 31 March  2012. This change in  accounting 
policy has no impact on the balance sheet presented for 31March 2012 nor  any 
other published balance sheet  and therefore no third  balance sheet has  been 
presented.





2. ACCOUNTING POLICIES



      Basis of accounting



The annual financial statements of Flybe Group plc are prepared in  accordance 
with IFRSs as adopted  by the European Union.  The condensed set of  financial 
statements included in this half-yearly financial report has been prepared  in 
accordance  with  International  Accounting  Standard  34  Interim   Financial 
Reporting, as adopted by the European Union.



      Going concern



The directors  are  satisfied  that  the Group  has  sufficient  resources  to 
continue in operation  for the foreseeable  future, for a  period of not  less 
than 12 months  from the date  of this report.  Accordingly, they continue  to 
adopt the going concern basis in preparing the condensed financial statements.
Further detail is contained in the financial review on page 15.



      Changes in accounting policy



The same  accounting policies,  presentation and  methods of  computation  are 
followed in  the condensed  set  of financial  statements  as applied  in  the 
Group's latest annual audited financial statements.



A number  of  amended standards  and  interpretations are  effective  for  the 
current financial year but  none of them  has had any  material impact on  the 
condensed financial information:



 Amendments to IAS 1 Presentation of Items of Other Comprehensive Income
Amendments to IAS 19 Employee Benefits





3. BUSINESS AND GEOGRAPHICAL SEGMENTS



The chief operating  decision maker  responsible for  resource allocation  and 
when assessing performance of  operating segments has  been identified as  the 
Operating Board.  Operating  segments  are  reported in  a  manner  which  is 
consistent with internal  reporting provided to  the chief operating  decision 
maker:



              Flybe UK This  business  segment  comprises  the  Group's   main 
                       scheduled   UK   domestic   and   UK-Europe   passenger 
                       operations and revenue  ancillary to  the provision  of 
                       those services.
          Flybe Europe This business segment  comprises the European  airline, 
                       MRO and  training businesses,  including Flybe  Finland 
                       and  any  future  acquisitions,  as  well  as   organic 
                       development.
Flybe Aviation Support This business segment  comprises the  MRO and  Training 
                       businesses supporting  Flybe's  UK  and  serving  third 
                       party  customers,   including   aircraft   maintenance, 
                       overhauls and  the associated  rotables and  consumable 
                       parts.





      Segment revenues and results



Transfer prices between business segments are set on an arm's length basis.



                                                        Six months ended

                                                          30 September
                                                  2012 £m 2011 (restated)^* £m
Segment revenues:
Flybe UK                                            328.5                329.1
Flybe Europe                                         55.5                  8.6
Flybe Aviation Support                               21.6                 22.6
Inter-segment sales                                 (9.3)               (10.1)
Revenue under management                            396.3                350.2
Less: Revenue from Flybe Europe joint venture      (55.5)                (8.6)
Group revenue (excluding investment income)         340.8                341.6
Segment results:
Flybe UK (including net finance costs of £0.5m in
2012 and £1.9m in 2011)                               2.0                 14.5
Flybe Europe  (including  net  finance  costs  of 
£0.2m in 2012)                                      (2.4)                (0.6)
Flybe Aviation Support                              (0.9)                (0.4)
(Loss)/profit before tax                            (1.3)                 14.3



* See note 1



The Flybe UK  segment includes  group costs of  £1.8m (H1  2011/12 £1.5m)  and 
revaluation gains on USD aircraft loans of £0.7m (H1 2011/12 £nil).



Flybe Europe results include both  appropriate share of joint venture  results 
and other costs of running this division.





      Segment assets and liabilities



For the purposes of monitoring segment performance and allocation of resources
between segments, the  Operating Board monitors  the tangible, intangible  and 
financial assets attributable to  each segment. All  assets are allocated  to 
reportable segments  with the  exception  of revalued  open fuel  and  foreign 
exchange derivatives and tax  assets and liabilities.  Assets used jointly  by 
reportable segments  are allocated  on  the basis  of  the revenue  earned  by 
individual reportable segments.



                               30 September 2012 £m 31 March 2012 £m
Segment assets:
Flybe UK                                      349.4            351.5
Flybe Europe                                   14.9             16.4
Flybe Aviation Support                         35.9             33.5
Total segment assets                          400.2            401.4
Unallocated assets                              9.5             13.9
Consolidated total assets                     409.7            415.3
Segment liabilities:
Flybe UK                                    (298.3)          (300.4)
Flybe Europe                                  (0.9)            (1.1)
Flybe Aviation Support                       (18.9)           (17.7)
Total segment liabilities                   (318.1)          (319.2)
Unallocated liabilities                       (6.2)            (6.7)
Consolidated total liabilities              (324.3)          (325.9)





4. SEASONALITY



Flybe's results  of  operations vary  significantly  from quarter  to  quarter 
within the financial year and the first half of the year is generally stronger
than the second half of the year. The airline industry is highly seasonal and
demand and yields are significantly  higher during the summer.  Historically, 
Flybe has generated more than 50% of its passenger revenues during the  summer 
season.





5. TAX



Current tax for the  six-month period is  charged at 0%  (six months ended  30 
September 2011:  0%), representing  the best  estimate of  the average  annual 
effective tax rate expected for the  full year, applied to the pre-tax  income 
of the six-month  period. Deferred tax  is calculated based  on the  expected 
annual outturn apportioned between the  interim periods based on the  expected 
pattern of profit generation.  There is no tax  charge or credit reported  in 
the H1 2011/12  results as  no material  change is  expected to  occur in  the 
overall deferred tax position by the end of 2012/13.





6. DIVIDENDS



No dividends have been paid or proposed either during the six months ended  30 
September 2012 or during the comparative accounting period.





7. EARNINGS PER SHARE



The calculation of the basic  and diluted earnings per  share is based on  the 
following data:



                                                           Six months ended
                                                             30 September
                                                               2012       2011

                                                                No.        No.
Weighted average  number  of  ordinary  shares  for  the 
purposes of basic earnings per share                     75,152,881 75,152,881
Effect of dilutive potential ordinary shares:
Share options                                                     -  1,223,274
Weighted average  number  of  ordinary  shares  for  the 
purposes of diluted earnings per share                   75,152,881 76,376,155
(Loss)/earnings per ordinary share - basic                   (1.7)p      19.4p
(Loss)/earnings per ordinary share - diluted                 (1.7)p      19.1p



Diluted loss per share is the same as  basic loss per share in the six  months 
ended 30 September 2012 because the Group recorded a loss and as such none  of 
the potentially issuable shares are dilutive.





8. PROPERTY, PLANT AND EQUIPMENT



                                                     30 September 31 March

                                                             2012     2012

                                                               £m       £m
Opening cost as at 1 April                                  246.8    214.7
Additions                                                    36.5    113.4
Disposals                                                  (25.5)   (81.3)
Closing cost at 30 September / 31March                     257.8    246.8
Accumulated depreciation                                   (76.2)   (84.7)
Closing net book value as at 30 September / 31March        181.6    162.1



 See note 13 for capital commitments.







9. BORROWINGS



Additional loans of £27.8m were drawn  down under new loan facilities to  fund 
the acquisition of two  E175s. A further two  E175s were delivered during  the 
period on an operating lease.



Repayments of other bank loans amounting to £14.9m were made during the period
including the repayment  of debt on  two Q400s disposed  of at their  expected 
retirement date.





10. SHARE CAPITAL



                                      30 September 31 March

                                              2012     2012

                                              £000     £000
Issued and fully paid
75,152,881 ordinary shares of 1p each          752      752



In the six months ended 30 September  2012 no shares were issued. The  Company 
has one class of ordinary shares which carry no right to fixed income.





11. JOINT VENTURES



In June  2012,  Flybe Group  plc  acquired  for a  consideration  of  £295,000 
(€358,000) a  further  13.7%  holding  (6.3% of  which  was  acquired  from  a 
subsidiary of Finnair Oyj) of Finnish Aircraft Maintenance Oy, to give a total
ownership of  60.0%. In  order  to simplify  the joint  venture  arrangements, 
Finnish  Aircraft  Maintenance  Oy  was  transferred,  via  a  share-for-share 
exchange, into the Flybe Nordic AB  group, becoming a wholly owned  subsidiary 
within that group.





12. CONTINGENCIES



The Group has entered into arrangements  to guarantee the Group's credit  card 
arrangements and  has placed  bonds  in favour  of various  aircraft  lessors, 
handling agents, fuel suppliers and customs offices as follows:



                                                30 September 31 March

                                                        2012     2012

                                                          £m       £m
Credit card arrangements                                14.0     14.0
Bonds                                                    8.9      8.8
Total                                                   22.9     22.8
Cash deposited to secure the above arrangements         22.9     15.7





13. CAPITAL COMMITMENTS



The Group  has,  over time,  contractually  committed to  the  acquisition  of 
aircraft with a total list price before escalations and discounts as follows:



                          30 September 31 March

                                  2012     2012

                                    £m       £m
Embraer E-Series aircraft        621.2    720.9





It is intended that  these aircraft will be  financed partly though cash  flow 
and partly through  external financing and  operating lease arrangements.  27 
aircraft were covered  by these arrangements  at 30 September  2012 (31  March 
2012: 31).



14. SHARE-BASED PAYMENTS



      Performance Share Plan ('PSP'),  Share Incentive Plan ('SIP')  and 
      Save As You Earn ('SAYE')



No shares were awarded  under these plans  in the six  months to 30  September 
2012 and the charge for the period in relation to them was £0.2m.



In the year ended 31 March 2012, the likelihood of awards being made under the
previous issues under the PSP was  re-assessed and it was determined that  the 
earnings per share element (70% of the  total award) is no longer expected  to 
vest.





15. EMPLOYEE BENEFITS



      Defined benefit scheme



The defined benefit  obligation as  at 30 September  2012 is  calculated on  a 
year-to-date basis, using the latest actuarial valuation as at 31 March  2010. 
There have not been any significant fluctuations or one-time events since that
time that would  require adjustment to  the actuarial assumptions  made at  31 
March 2010.



The defined benefit  plan assets  have been  updated to  reflect their  market 
value at 30 September 2012. Differences between the expected return on assets
and the actual return on assets of a loss of £0.2m (2011: loss of £0.2m)  have 
been recognised as an actuarial gain or loss in the statement of comprehensive
income in  accordance  with  the  Group's  accounting  policy.  No  asset  is 
recognised in respect of the net surplus  of £1.8m because the Group does  not 
have sufficient certainty that any asset will eventually be realised.



As required by the  Scheme Rules, the Scheme  valuation applies the  statutory 
basis of  revaluation  under the  prevailing  revaluation order  contained  in 
legislation. The current  revaluation order uses  the September 2010  Consumer 
Prices Index ('CPI').





16. RELATED PARTIES



At 30 September 2012, the Group is 48.1% (unchanged from 31 March 2012)  owned 
by Rosedale Aviation Holdings Limited, incorporated in Jersey.



Group companies entered into the  following transactions with related  parties 
which are not members of the Group:



                                   Sales of services
                             Six months ended 30 September
                                         2012          2011

                                           £m            £m
Preston Travel (CI) Limited               0.4           0.6
Flybe Nordic                              1.9           0.7
                            Amounts owed by related parties
                                 30 September      31 March
                                         2012          2012

                                           £m            £m
Preston Travel (CI) Limited               0.6           0.3
Flybe Nordic                              2.7           1.5



The Group provided  services to  Preston Travel (CI)  Limited which,  together 
with Rosedale Aviation Holdings  Limited, is a  subsidiary of Rosedale  (J.W.) 
Investments Limited.



The Group also provided services to Flybe  Nordic, a 60% holding of which  was 
acquired in August 2011.



                                  Purchases of services
                              Six months ended 30 September
                                        2012           2011

                                          £m             £m
Edenfield Investments Limited            0.2            0.2
Downham Properties Limited               0.2            0.1





The transactions  with Edenfield  Investments Limited  and Downham  Properties 
Limited are  disclosed although  there  is no  holding or  subsidiary  company 
relationship between  these  two  companies  and  Rosedale  Aviation  Holdings 
Limited. These two companies are owned  and controlled by the EJ Walker  1964 
settlement, established by the  former wife of the  late Mr Jack Walker;  this 
trust is  separate for  tax purposes  from the  Jack Walker  Settlement  which 
controls  Rosedale  Aviation  Holdings  Limited.  The  Group  also  purchased 
property  services  from  Edenfield  Investments  Limited  and  from   Downham 
Properties Limited.



No amounts were owed to related parties at 30 September 2012 or 31 March 2012.





      Acquisition of further stake in Finnish Aircraft Maintenance Oy



As discussed further  in note 11,  Flybe acquired a  further 13.7% holding  in 
Finnish Aircraft Maintenance Oy in June2012 for £0.3m.



      Transactions with key management personnel



Compensation paid to  the Directors will  be disclosed in  the Group's  annual 
report for the year ending 31 March 2013.





  Glossary



advanced seat assignment   a product offered by the Group allowing  passengers 
                           to pre-select  their seats  on an  aircraft for  an 
                           additional charge
Air Operator's Certificate an  air  operator's   certificate  issued  by   the 
                           national regulator - the CAA in the UK and Trafi in
                           Finland
CAA                        the UK Civil Aviation Authority
codeshare                  an arrangement whereby multiple airlines sell seats
                           on the same flights and multiple flight designators
                           and flight numbers are used for the same flight
contract flying            a leasing agreement  whereby an aircraft  (together 
                           with its operating crew), maintenance, support  and 
                           insurance are provided from  one party to  another, 
                           otherwise known as an ACMI agreement
domestic                   passengers  from  one  UK  (including  the  Channel 
                           Islands and the Isle of Man) or Finnish airport  to 
                           another UK (including the  Channel Islands and  the 
                           Isle of Man) or Finnish airport as appropriate
effective exchange rate    the cost of currency for a period implicit  through 
                           theweighted average cost of (i) currency  acquired 
                           through  forward   contracts  and   (ii)   currency 
                           boughtin thespot markets
ETS                        Emissions Trading Scheme
European business cities   the market for air travel from regional UK airports
market                     to   Amsterdam,   Barcelona,   Berlin,    Brussels, 
                           Copenhagen,    Dusseldorf,    Frankfurt,    Lisbon, 
                           Luxembourg, Madrid,  Milan,  Munich,  Oslo,  Paris, 
                           Rome, Stockholm, Stuttgart and Vienna
FAM                        Finnish Aircraft Maintenance which is wholly  owned 
                           by Flybe Nordic (see note 11)
Flybe Finland              Flybe  Finland   Oy  (formerly   Finnish   Commuter 
                           Airlines Oy) which is wholly owned by Flybe Nordic
Flybe Nordic               Joint  venture  incorporating  Flybe  Finland   and 
                           Finnish Aircraft Maintenance Oy and of which 60% is
                           owned by Flybe and 40% by Finnair Oyj
IATA                       International Air Transport Association
IPO                        the admission, through an Initial Public  Offering, 
                           of the Company's shares to the Official List of the
                           London Stock Exchange on 15 December 2010
line maintenance           minor or scheduled  maintenance carried  out on  an 
                           aircraft that  is in  service  to ensure  that  the 
                           aircraft is  fit  for its  next  flight  (including 
                           defect   rectification,   daily   checks,    visual 
                           inspections, minor repairs and modifications  which 
                           do not require extensive disassembly)
load factor                the number of scheduled seats sold divided by  seat 
                           capacity (and 'flown'  load factor,  the number  of 
                           seats flown divided by seat capacity)
MRO                        maintenance, repair and overhaul
New Economy                A  type  of  ticket  that  includes  advanced  seat 
                           selection, a 20  kg hold bag,  a changeable  ticket 
                           (fare  difference  may   apply)  and  SMS   booking 
                           confirmation
passenger                  a person with an issued ticket where the ticket has
                           charged a fare and/or a passenger surcharge and tax
                           (if applicable)
purchase rights            the right to purchase additional aircraft under the
                           same terms and  conditions as for  firm and  option 
                           aircraft. Such  rights  to be  exercised  within  a 
                           finite time
regional aircraft          turboprop aircraft and regional jets
regional airline           an  airline  that   flies  predominantly   regional 
                           aircraft
regional UK                an airport or destination in the UK (including  the 
                           Channel Islands and the Isle of Man) but  excluding 
                           London
route                      a scheduled service flown by an airline other  than 
                           any franchise route
seat capacity              the average number of seats per aircraft multiplied
                           by the number of scheduled sectors flown
sector                     a flight  between  an  originating  airport  and  a 
                           destination airport, typically with no  intervening 
                           stops
sector length              the distance, typically in  kilometres, of a  flown 
                           sector
slot                       an authorisation  to arrive  at  or depart  from  a 
                           stand at a particular airport at a specific time on
                           a particular day
summer season              the last Saturday in March until the last  Saturday 
                           in October in any particular year
Trafi                      the Finnish Transport Safety Agency,
UK domestic routes         routes where  both  the departure  and  destination 
                           airports are within the United Kingdom, the Isle of
                           Man or the Channel Islands
under management           Figures presented for revenue, passengers and seats
                           flown 'under  management'  include both  Group  and 
                           joint venture activity but exclude contract flying
winter season              the first  Sunday following  the last  Saturday  in 
                           October to the Friday  before the last Saturday  in 
                           March in any particular year
yield                      total  ticket  revenue  per  passenger  (after  the 
                           deduction of government taxes and levies)



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


IR FSUFAWFESEIF -0- Nov/08/2012 07:01 GMT