Oil Putting Pinch on Airlines as Flybe Drops Most Since 2010 IPO

(Bloomberg) -- Rising oil prices that have already wiped out five European airlines since August have claimed another victim: Britain’s biggest carrier on domestic routes lost more than two-fifths of its value on Wednesday as an escalating fuel bill coincides with weaker demand.

Shares of Flybe Group Plc ended the day 41 percent lower in London as the Exeter, England-based company said “softening” second-half sales would lead full-year profit to fall short of analysts’ estimates. The drop was the biggest since Flybe floated in 2010, with the stock’s closing price of 18.9 pence some 94 percent below its debut level.

Flybe has sought to carve out a model focused on secondary cities largely ignored by network and low-cost operators, becoming Europe’s biggest airline that uses planes with 100 seats or less. While a potentially valuable market, the smaller aircraft generate lower operating margins, leaving the company particularly vulnerable to fluctuations in costs and demand.

Flybe has culled routes and dropped regional jets in favor of less thirsty turboprops after crude hit the highest levels in four years and airports operator Stobart Group Ltd. dropped plans for a takeover.

Other carriers have already succumbed to oil’s rise.

Belgium’s VLM announced its liquidation in August, when Switzerland’s Skywork Airlines AG also ceased flights, the German arm of Small Planet filed for insolvency in September, with Azur Air halting operations in the country, and Nordic leisure carrier Primera Air collapsed on Oct. 1. That’s after Air Berlin Plc and Monarch Airlines disappeared last year.

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