SHAPING A SUSTAINABLE FUTURE Full Year Results Year ended 31 March 2017 Analyst and Investor Presentation 8 June 2017
Agenda Introduction Christine Ourmieres-Widener Financial Review Philip de Klerk Performance Review and Priorities Christine Ourmieres-Widener Summary and Q&A 2
Introduction PASSIONATE ABOUT THE AIRLINE INDUSTRY TRULY PASSIONATE ABOUT FLYBE Tremendous opportunities for Flybe to connect and engage with communities and to establish a reputation for excellence in serving our customers
Financial review
2016/17 Group financial summary Revenue 13.4% increase in Group revenue Metrics per seat 3.6% reduction in passenger revenue 5.2% reduction in costs including fuel (constant currency) 2.0% increase in costs including fuel Profit & loss (6.7)m adjusted loss before tax 1 (19.9)m reported loss before tax (26.7)m reported loss after tax Robust balance sheet 153.5m net assets, (64.0)m net debt and 124.3m total cash 1. Adjusted profit before tax is before revaluation gains or losses on USD aircraft loans
Results reflect FX, challenging environment and additional capacity 2015/16 2016/17 YOY change m m m Flybe UK 8.8 (5.8) (14.7) FAS 2.5 3.4 0.9 Group costs (5.8) (4.3) 1.6 Adjusted profit/(loss) before tax 5.5 (6.7) (12.2) Revaluation losses on USD loans (2.8) (13.2) (10.4) Reported profit/(loss) before tax 2.7 (19.9) (22.6) Tax credit/(charge) 4.1 (6.8)* (10.9) Profit/(loss) after tax 6.8 (26.7) (33.5) EBITDAR 121.9 134.2 12.3 Earnings/(loss) per share (basic), pence 3.1 (12.3) (15.4) *Tax charge of 6.8m as we decided not to recognise the full tax asset due to the increase in the quantum of capital allowances
Group revenue increased by 13.4% 2015/16 m 2016/17 m YOY % change Passenger revenue 571.7 619.3 8.3% White Label revenue 13.9 33.0 Revenue from other activities 15.4 23.3 FAS revenue (third party) 22.8 31.8 Revenue 623.8 707.4 13.4%
Stable yield but lower load factor 2015/16 2016/17 YOY % change Seats, m 11.3 12.7 12.3% Passengers, m 8.2 8.8 7.6% Load factor, % 72.6% 69.6% -3.0ppts Average passenger sector length, km 468.1 503.1 7.5% Passenger Yield 70.23 70.20 0.0% per seat 2015/16 2016/17 YOY % change Passenger revenue 50.64 48.84-3.6% Other revenue, incl. White Label 2.59 4.44 Total Flybe UK revenue 53.23 53.28 0.1%
Cost per seat up 2%, but 5.2% reduction at constant currency 58 (0.47) 0.50 57 56 55 Change in FX rates YoY (4.00) 56.67 (0.46) Mostly increase in White Label staff costs More owned aircraft 0.85 (0.14) Including maintenance cost 56.39 2.65 m 54 53.74 53 52 52.67 Mainly E195 flying Hedging benefits Fuel price saving 51 50 2015/16 Op. cost per seat FX impact 2015/16 Constant currency Staff Costs Airport, Enroute & Ground Ops Aircraft Rental Charges Other Operating gains/(losses) Other 2016/17 Op. cost excl. fuel Fuel 2016/17 Op. cost per seat
Lower oil price benefit, but currency headwind Fuel Market price in US dollar flat at USD470 32% reduction in blended price at USD556 per metric tonne USD 13% adverse market rate Blended rate decreased by 8% at USD1.45 Outlook Fuel: 90% hedged for 2017/18 at USD490, 29% for H1 2018/19 at USD544 USD: 89% hedged for 2017/18 at USD1.41, 31% for H1 2018/19 at USD1.29 As at 5 June 2017
Balance sheet 124.3m total cash at 31st March 2017 (31st March 2016: 171.4m) (64.0)m of net debt (31st March 2016 net funds: 62.2m) 153.5m net assets (31st March 2016: 154.2m) Pension scheme closed Triennial actuarial valuation completed; 12m deficit agreed over 12 years Deficit recovery contributions increase from 0.5m to 0.83m p.a. IAS19 pension deficit increased to 20.8m Capital restructure implemented to increase distributable reserves
Fleet peaked in May 2017 85 2014/15 2015/16 2016/17 80 75 No. of Aircraft 70 65 60 55 50 45 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 E195 Surplus AC Republic Deliveries Excludes ATRs
Fewer aircraft and reduced cost Took ownership of 10 used Q400 aircraft, out of operating lease for c 98m C 8m p.a. saving from increasing the number of owned aircraft and reducing the number of leased aircraft over the last two years Added flexibility to manage fleet size As at 31 ST March Total Aircraft* % Owned 2015/16 70 24% 2016/17 78 35% 2017/18 74 36% 2018/19 69 43% 2019/20 65 48% assumes all lease aircraft returned at end of lease and no new purchases off lease, ATRs excluded
Net debt of (64.0)m 120.0 100.0 34.9 (25.1) 80.0 60.0 62.3 (7.4) (7.7) 57.0 (107.8) 40.0 m 20.0 0.0 (64.0) (20.0) (40.0) (13.2) (60.0) (80.0) Net funds 31 Mar 2016 Operating cash Maintenance Capex & Into service Intangible and other Capex Net Financing Underlying net funds Aircraft & Engine Purchases FX on USD loans Net funds 31 Mar 2017
2016/17 Financial results - summary Continued growth of revenue and number of passengers Continuous focus on cost per seat Improved aircraft ownership cost Adjusted loss before tax of (6.7)m (profit 5.5m in 2015/16) Reported loss after tax of (26.7)m (profit 6.8m in 2015/16) Strong balance sheet and cash position
2016/17 Performance and Priorities 2017/18 FLYBE GROUP PLC
2016/17 Performance FLYBE GROUP PLC
2016/17 Performance Serving more customers with a stable yield 33 new routes in 2016/17, 13 routes cancelled 199 Total routes // 64 airports // 152,064 flights 8.8m passengers and 12.3% more capacity Revenue growth, lower load factor and stable yield Reliability mixed 82.7% OTP arrivals, down from 85.4% 99.0% TDR, up from 98.8% Aircraft utilisation improved 6h 54m per day, up by 5% Employees 3 year pay deal 5% share deal, aligning interests with shareholders 18
Flybe diagnosis A sound business model for the airline With other business opportunities Capacity control to enable a demand led business A strong brand but strategy should be focused on the UK However. More focus on operational and organisational excellence More customer centric Enhanced digital platform Creating better shareholder value 19
Sound business model A leading regional airline serving UK regions
Thinner routes can only be served economically by regional aircraft Flybe analysis of minimum route thickness by aircraft type for a daily frequency 400,000 Competitors Main Area 350,000 300,000 250,000 200,000 150,000 Flybe Sweet Spot 156 180 189 100,000 50,000-118 Flybe Partners 78 88 34 42 SAAB340 ATR42 ATR72/Q400 E175 E195 A319 A320 B737 Note: Analysis assumes: 70% Load Factor on SAAB340, ATR, Q400, E175 and E195, 89% on A319 and A320 and 85% on B737-800 Flight frequency at 3 rotations a day, 7 days per week. No. in bars are avg. seats per aircraft type (Source: Flybe analysis)
Other business opportunities White Label A long term partnership with SAS Brussels airline contract expires in October Selective investment in profitable opportunity MRO Retain it and integrate it A400M contract very successful Prime role in supporting Flybe Training Academy Becoming a profit centre 22
Priorities 2017/18 FLYBE GROUP PLC DAVID SCHILCHER 2016
Sustainable Business Improvement Plan NETWORK, FLEET & REVENUE OPTIMISATION OPERATIONAL EXCELLENCE ORGANISATIONAL EXCELLENCE SALES & MARKETING TO DRIVE REVENUE GROWTH TECHNOLOGY FIT FOR FLYBE COST IMPROVEMENT PROGRAMME Create a sustainably profitable network and determine fleet size and shape for Flybe's operations. Maximise revenue opportunities. Design & implement a sustainable operational planning structure delivering a safe, secure, cost effective customer proposition. Improve the safety & security performance Design and deliver cost effective organisation structure, with management and staff fully aligned to company objectives Deliver sustainable revenue growth to maximise profitability. Enhance the customer interface and experience through new digital platforms. To deliver a cost effective IT service that fully meets Flybe's customer, operational and internal requirements. Ensure Flybe has a sustainable, competitive cost base enabling Flybe to deliver cost effective flying to customers. ORGANISATION AND SAFETY CULTURE TO ENSURE SUCCESS
Taking control of our fleet Expectations unchanged from H1 90 80 70 70 8 78 2 (6) 74 (5) (3) 3 69 (1) (4) 1 84 48% 65 60 50 40 30 20 10 24% 35% 36% 43% 48% 0 2015/16 Fleet Q400 delivery 2016/17 Fleet Q400 delivery Q400 expire 2017/18 Fleet Q400 expire E195 expire E175 delivery 2018/19 Fleet Q400 expire E195 expire E175 delivery 2019/20 Fleet Excludes 5 ATRs deployed in Stockholm for SAS White Label and assuming all leases returned at the end of lease and no additional purchases off lease % shows the owned aircraft in our fleet
Focus on UK Concentrate on routes starting and finishing in UK Cancelled intra European routes for W17 Brexit risk & opportunity Balanced focus on leisure travelers 26
Codeshare / Franchise
Flybe loves Scotland 31% of total passengers Eastern Airways partnership Loganair no longer to be part of the Flybe Franchise 2 New routes launched to LHR 79 Flights per week from Scotland to London Flybe will remain Scotland s best airline 28
Operational excellence Improved reliability Additional modifications to Q400 aircraft Well planned and executed maintenance Improved third party management Integrated maintenance organisation Improved on time performance Better availability of spare aircraft Better availability of standby crew Working closer with airport partners Implement new systems AMOS Electronic Flight Bag 29
Organisational excellence Design Flybe s Future Organisation Leaner organisation, more responsibility Less duplication, more accountability Consistent with fleet & network strategy and company priorities Develop Flybe s culture Embed refreshed values Strengthen safety, security and compliance culture Reward based on performance 30
Flybe must be better at digital Over 80% of booking via the web Non standard & Lack of flexibility Poor customer experience Limited customer communication Limited customer data Restricted upselling opportunity A 3 year roadmap A great opportunity to improve revenues and decrease costs 31
The new digital platform will support the customer life cycle
Outlook and summary FLYBE GROUP PLC
H1 2017/18 Outlook H1 forward sales as of 5th June 2017: 2.7% capacity increase vs. prior year 45% of capacity sold vs. 44% prior year 2.6% increase in yields helped by timing of Easter 4.6% increase in passenger revenue per seat We expect c4% capacity reduction in Winter 34
We have slowed capacity growth, leading to improved load factor 20.0% 15.0% Capacity growth (seats) YoY change 10.0% 5.0% Capacity expected to reduce in H2 0.0% -5.0% Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Load Factor
Revenue per seat is recovering, and benefit of oil price annualises 10.0% YoY change 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Cost per seat Incl. fuel Benefit of lower Oil prices Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Cost per seat Revenue per seat Excl. fuel -6.0% -8.0% -10.0%
Summary Business resilient in tough market Growth in capacity, passenger volume and revenue Reduction in unit cost Partnerships Control of capacity growth Capacity will be reduced over the coming years Optimise route network Enhance reliability and efficiency Digital & customer centric Digitalise Improve marketing and sales Serving our customers better will create value for shareholders
Q&A
Legal disclaimer
Appendix
Fleet evolution At 31 st March 2017 Aircraft Deliveries Aircraft Handbacks At 31 st March 2018 Bombardier Q400 turboprop 58 2-6 54 Embraer E175 regional jet 11 - - 11 Embraer E195 regional jet 9 - - 9 ATR72 turboprop (SAS contract) 5 - - 5 Total 83 2-6 79 Held on operating lease 56 2-6 52 Owned 27 - - 27 Total 83 2-6 79 Total seats in fleet 6,904 156-468 6,592 Average seats per aircraft 83.2 83.4 The fleet peaks in May 2017 before Flybe starts to return end-of-lease aircraft to its lessors in Autumn 2017. Six Bombardier Q400 aircraft will be handed back later in 2017 at, or slightly ahead of, lease expiry. The number of owned aircraft moved from 17 to 27 year-on-year with owned aircraft now representing 32.5% (2015/16: 23.0%) of the fleet. (Excluding ATRs 34.6% of the fleet is owned)
Group Balance Sheet m March 2017 March 2016 YOY change m m m Aircraft 287.3 192.3 95.0 Other property, plant and equipment 21.8 21.4 0.4 Intangibles 11.9 13.3 (1.4) Net (debt)/funds (64.0) 62.2 (126.2) Derivative financial instruments 24.5 (9.9) 34.4 Other working capital - net (117.2) (123.5) 6.3 Deferred taxation (0.6) 11.3 (11.9) Defined benefit pension scheme deficit (20.8) (15.3) (5.5) Other non-current assets and liabilities 10.6 2.4 8.2 Net assets and shareholders' funds 153.5 154.2 (0.7)
Total cash of 124m 250.00 58.2 (107.8) 200.00 34.9 (25.1) 171.5 (7.4) 150.00 m 124.3 100.00 50.00 0.00 Opening Cash 31 Mar 2016 Operating cash Maintenance Capex Intangible Capex Financing activities Aircraft & Engine Purchases Closing cash 31 Mar 2017