Flybe, Europe’s largest regional airline, today announces its Interim Management Statement for the period to 7 August 2013, incorporating its performance in thefirst quarter ended 30 June 2013 (‘Q1 2013/14’).

Flybe will announce its interim results for the half-year ended 30 September 2013 in November 2013.

Group

· Trading in line with expectations.

· up 18.5% to £229.0 million due to increased contract flying activity in Flybe Finland, Flybe’s joint venture with Finnair.

· Group revenue increased by 0.7% to £164.2 million (Q1 2012/13: £163.0 million).

· Good progress on implementation of Phase 1 of Flybe’s turnaround plan:

o 2.9% reduction in total costs in Q1 2013/14 (excluding restructuring and revaluation of USD aircraft loans).

o Cost savings from Phase 2 of the turnaround plan are expected to result in additional year-on-year cost reductions from Q2 2013/14 onwards.

· Total cash at 30 June 2013 was £54.6 million (30 June 2012: £59.8 million), of which £23.6 million was free cash.

Flybe UK

· Scheduled seats flown were 3.0 million, down 1.6% on Q1 2012/13.

· Flybe UK generated total revenues of £152.4 million in Q1 2013/14, down 1.2% on Q1 2012/13.

· Passengers totalled 2.0 million, up 4.9% on Q1 2012/13, representing 4.3 ppts increase in load factor to 66.5% (Q1 2012/13: 62.2%).

· Passenger revenue per scheduled seat of £48.20 was in line with Q1 2012/13.

· Costs per seat for the quarter to 30 June 2013 decreased by 1.9%.

· Fuel hedged at $988 per tonne for 80% of forecast burn in Q2 2013/14, and 73% hedged for H2 2013/14 at $992 per tonne.

Flybe Outsourcing Solutions

· Flybe Finland:

o Total revenues of £64.8 million in Q1 2013/14, up 113.9% on Q1 2012/13 due to increased number of aircraft on contract flying, from which revenues of £56.0 million were generated (Q1 2012/13: £19.1 million).

o Operated seats flown were 1.2 million, up 81.5%, of which seats flown under contract totalled 1.0 million (Q1 2012/13: 0.4 million).

· Flybe Aircraft Maintenance:

o Revenues of £10.1 million in Q1 2013/14 (Q1 2012/13: £10.0 million), of which £7.0 million (including proceeds of £1.7 million from sale of inventory) was from third party customers, versus £6.2 million in Q1 2012/13.

o Costs for the quarter to 30 June 2013 decreased by 14.4% over Q1 2012/13.

Strategic and operational highlights

Flybe UK

· Sale of slots at London Gatwick to easyJet plc for £20.0 million in cash was approved by shareholders on 2 August 2013, with £7.5 million of cash received on that day. £10.0 million will be received in November 2013 with balance of £2.5 million in June 2014.

· Signed agreement with Embraer to defer 16 Embraer E175 aircraft deliveries, originally scheduled for 2014 and 2015, to 2017 to 2019.

· Strategy to increase passenger volume resulted in 4.3 ppts improvement in load factor to 66.5%.

· Market share of Flybe brand in the three months to 30 June 2013:

- UK domestic market – 29.0% (Q1 2012/13: 28.3%)

- UK regional market (excluding London) – 55.0% (Q1 2012/13: 51.2%).

Flybe Outsourcing Solutions

· All the core businesses of Flybe Outsourcing Solutions (the Finnish joint venture, Flybe Finland; Flybe Aircraft Maintenance; Training Academy; and contract flying for Brussels Airlines) traded profitably in Q1 2013/14.

Restructuring update

· In Flybe’s annual accounts for the year to March 2013, management reported that the restructuring programme is targeted to deliver cost savings of £40 million in 2013/14, rising to annualised savings of £49 million for 2014/15 year onwards. Progress remains on track to achieve these goals and a full update will be presented as part of the half year results presentation in November 2013.

· Restructuring and associated costs incurred in Q1 2013/14 totalled £2.7m. Management expect to incur further restructuring and associated costs of around £2 million in 2013/14, taking the total costs of delivering Phase 2 of the turnaround plan to approximately £5 million.

Board and management

· Roles of Chairman and Chief Executive Officer separated with effect from 1 August 2013: Saad Hammad appointed as Chief Executive Officer and Jim French became non-executive Chairman.

· Board restructured – number of executive Directors reduced from five to two.

· New Chief Commercial Officer appointed with effect from 28 October 2013.

· Search process for new Chief Financial Officer underway following Andrew Knuckey’s decision to leave Flybe.

Trading outlook

The Board continues to anticipate challenging market conditions and that Group revenues will be broadly flat year-on-year. The Group will maintain its focus on lowering its cost base and is on target to deliver savings of circa £40 million in the current financial year, partially offset by expected headwinds such as an adverse USD exchange rate versus 2012/13. The Board therefore believes that it remains on track to deliver results in line with its expectations for the year.

Concurrent with the cost reduction programme, the new leadership team has commenced a full review of the Group’s operations and will report in due course on the future strategic development and direction of the business.