Flybe flies higher on HSBC upgrade to 'buy'

The bank said the group’s first-half, reported earlier this month, was much better than it expected with operating profit and underlying pre-tax profit both roughly treble its estimates.

“We were pleasantly surprised by the yield performance of Flybe in H1, whilst our forecasts for both other revenues and costs undershot significantly,” it said.

In addition, HSBC said it was encouraged by Flybe’s hedge portfolio. It noted the business is very exposed to the USD/GBP exchange rate and fuel price.

“We now know FY18 USD/GBP is 71% hedged at USD1.44 and FY18 fuel is 71% hedged at USD487/MT, both more than double the protection we previously anticipated.”

The bank said Flybe was “taking back control” and executive chairman Simon Laffin offered a credible presentation on how for the first time since the IPO, the group will have control over its capacity after the end of full-year 2017.

“Until now Flybe’s capacity has been growing at a rate dictated by the previous management’s necessary actions to reverse out of legacy aircraft orders. From the 80 aircraft fleet at FY17, Flybe will now be able to manage its fleet to 65 by FY20, or grow it to 84, depending on the market.”

At 1008 GMT, the shares were up 1.2% to 44p.