Giving an update on its “Delivery and Future Direction” turnaround plan, Flybe said it has reached a “conditional agreement” to sell 25 pairs of Gatwick slots to easyJet for £20 million. EasyJet confirmed the deal, saying it will use the slots to add new routes and boost frequencies from Gatwick.
“Under the agreement with easyJet, Flybe will continue to operate all of the slots until March 2014, during which time there will be no changes to flights, frequencies or timings to or from London Gatwick. Flybe would then intend to exit its seven routes operated to and from the London Gatwick market,” Flybe said in a statement.
Flybe flew 550,000 passengers from Gatwick during the 2012-13 financial year, but it said price increases and “penalistic levels” of air passenger duty have made its Gatwick operations “unsustainable in the long-term.” The Gatwick routes, which will be axed from March 29, 2014, comprise Belfast City, Guernsey, Inverness, the Isle of Man, Jersey, Newcastle and Newquay.
EasyJet will pay Flybe the £20 million in three tranches: £7.5 million when Flybe’s shareholders agree to the sale, £10 million in November 2013 after the summer slots exchange and £2.5 million in June 2014 when the winter slots are exchanged. Flybe said proceeds from the deal, which is expected to complete in July 2013, will be used to cut its debts, to fund its turnaround plan and for general working capital. “The funds generated by the disposal of the slots will be re-invested in the remaining 159 Flybe routes, with medium-term expansion of services planned from core target bases,” it said.
In a second “significant transaction,” Flybe has agreed to defer delivery of 16 E-175s from 2014-15 to 2017-19, cutting its winter 2013-14 pre-delivery payments by £20 million. Flybe also confirmed the sale of two Bombardier Q400s for “a modest book profit,” leaving two surplus Q400s remaining.
Flybe has now secured £30 million of its planned 2013-14 cost savings, exceeding its £25 million target. It has cut £16 million from its employment costs, £8 million by outsourcing non-core functions and £6 million by renegotiating its supply contracts.
The Exeter-headquartered carrier originally detailed plans to cut 300 jobs, but said in its latest update it has reduced the headcount 22% from 2,730 to 2,140—or 590 positions.
A Flybe spokesman told ATW this figure includes 290 redundancies—of which only 43 were compulsory—and the outsourcing of about 300 call center, check-in and line maintenance positions. Flybe and pilots’ union BALPA have also agreed in principle to a 5% pay cut in return for extra time off.
Under a second “Making Flybe Fit to Compete” phase, Flybe is targeting additional annual savings of £25 million. It plans to cut a further 80 positions through voluntary redundancies to slash a further £6 million from its staff costs in 2013-14 and £9 million in 2014-15. Further procurement savings will also be rolled out, saving £4 million in 2013-14 and £10 million in 2014-15.
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