Flybe : Notice of AGM

Description

Impact

Mitigation

Risk Trend

Safety and security

Failure to identify or prevent a health and safety or security related incident including terrorist, or internal or external attack, or to respond appropriately to a safety or security related event.

Significant adverse effect on Flybe's reputation, financial results and operational performance.

Safe and secure operations are the number one priority for all of Flybe's management and staff.

A Safety and Security Review Board, chaired by Sir Timo Anderson, is responsible for assuring all policy and governance.

Flybe operates both a strong Safety Management System and a comprehensive Security Management System and has appropriate procedures in place, including trained staff.

An emergency response plan is in place and is reviewed and tested, including full crisis management.

Stable

Information security and cyber threats remain a key focus for the Group. The incidence of cyberattacks has increased worldwide and Flybe is exposed to this as a result of its reliance on the internet for a high proportion of delivery of its sales.

Loss of systems or connectivity to the internet, as a result of internal or external threat, could lead to disruption and lost revenue with an adverse impact on Flybe's financial condition.

Breaches in IT security, or fraud, could adversely affect Flybe's brand and reputation, and have an adverse impact on revenue.

A security improvement programme is underway to improve resilience in this area.

The following controls are in place:

· Information Security Committee oversees the security framework to ensure appropriate controls are put in place;

· Security awareness policy and procedures, including a policy read-and-sign;

· Information security training;

· The use of third party experts to assess risk and recommend mitigating actions;

· Robust security procedures which are tested and reviewed by independent third parties; and

· The deployment of system monitoring software to detect and prevent unauthorised access.

Reduced risk

Description

Impact

Mitigation

Risk Trend

Commercial and operational

Flybe is exposed to sustained deterioration in general economic conditions, and reduction in domestic and regional air travel, particularly in the UK.

Adverse pressure on revenue and load factors, and negative impact on Flybe's growth prospects, financial condition and the value of its assets, particularly aircraft.

Flybe monitors route performance within its commercial teams and adjusts flying patterns to customer demand.

Flybe's fleet planning is designed to provide it with the most fuel-efficient aircraft available under a mix of ownership and lease terms.

Stable

Flybe operates in a highly competitive aviation market.

Adverse effect on market share leading to reduced revenue and profits.

Flybe has a strong position in the markets where it operates and extends the reach of its brand through franchising and alliances.

Processes are in place to monitor and report on route by route performance and competitor activity and to react rapidly where necessary.

Stable

Flybe is exposed to the effects of extraneous events, such as epidemics or natural disasters (e.g. severe weather or ash cloud disruption).

Reduced demand, market share and revenue, any of which may adversely affect Flybe's financial results or operational performance.

Flybe has procedures in place to respond to such events, and to communicate effectively with passengers and shareholders.

Stable

Flybe is becoming increasingly reliant on the Bombardier Q400 aircraft, with dispatch reliability being a key factor in the performance of the airline.

Technical or mechanical issues could result in a grounding of the fleet which would impact the flying programme and negatively impact the reputation of the aircraft type.

Flybe operates a rigorous aircraft maintenance programme, with continuous improvement to aircraft reliability through development of modifications through Bombardier.

Standby aircraft within the programme allows some flexibility in aircraft availability.

Stable

Flybe is heavily dependent on its information technology systems, the ongoing development of those systems, and the internet to operate its business.

Future scalability and resilience of such key systems are an issue to the business maintaining a competitive advantage

Inability to implement successful development could lead to Flybe's business plans not being fulfilled.

IT project prioritisation and control are in place in order to adequately focus attention and resources on the key project deliverables.

Flybe uses third parties to supplement its own resources. Effective processes relating to contract review, compliance and management are in place to mitigate the consequent risks that arise.

Stable

Flybe depends on good industrial relations, across all its regions, with a workforce that is, in significant part, unionised, and is exposed to shortages of key personnel.

Adverse effect on Flybe's reputation, financial results and operational performance.

Flybe has well-developed consultation and negotiation processes with its employees and the unions and continues to ensure its employment remuneration reflects current market conditions and practices that are supported by succession planning policies.

Stable

Description

Impact

Mitigation

Risk Trend

Financial

Flybe is exposed to the failure or non-performance of commercial counterparties as well as requiring the services of key suppliers such as airports, air traffic control systems, fuel supply companies, and single source suppliers.

Adverse effect on Flybe's reputation, financial results or operational performance.

Most suppliers can be replaced by an alternative suitable supplier. Contract negotiation teams are highly experienced and knowledgeable of the industry with a strong track record of delivering value for Flybe, and therefore the risk has reduced.

Increased risk

Fluctuations in fuel prices and foreign exchange rates.

Adverse movements in these areas can adversely affect both Flybe's profit and financial position.

While hedging cannot guarantee against significant long-term price changes, a well-established hedging strategy is in place that is designed to provide certainty over a significant proportion of Flybe's cost base in the coming 12 months.

Stable

Unavailability of suitable financing.

Lack of adequate liquid resources could disrupt and adversely affect Flybe's financial results.

Flybe's policy seeks to maintain appropriate levels of free cash which will be available to meet costs in the event that our normal activities are temporarily disrupted by, for example, severe weather, volcanic ash, extended industrial dispute or fleet grounding.

The failure to remove surplus aircraft costs, or to have delivery of additional aircraft surplus to requirements, has been removed and is therefore no longer a risk.

Stable

Description

Impact

Mitigation

Risk Trend

Regulatory

Regulatory changes in the airline industry may have an adverse impact on an airline's costs, operational flexibility, marketing strategy, business model and ability to expand.

In the event that the UK leaves the European Union, this could have an effect on the Group due to its operations across Europe.

Adverse impact on reputation, costs and market share coupled with decline in growth opportunities.

Management engages with governments through direct contact and membership of industry organisations.

Flybe has an in-house legal team to monitor compliance with formal regulatory requirements.

Stable

Airlines may be adversely affected by increases in Air Passenger Duty in the UK and its equivalent in other countries, and by any future amendment with regard to regulation of emissions trading and other environmental laws and regulations, or negative environmental perception of the airline industry.

Increased costs and reduced demand across the airline industry which may result in reduced profitability for Flybe.

Reduced demand for aviation across the industry.

Management monitors governments' proposals with regard to changes in planned approach to aviation taxation and engages with governments through direct contact and membership of industry organisations.

Flybe seeks to pass on additional duties to its passengers through its pricing approaches.

Flybe continues to be compliant with the ETS regime.

Flybe operates fuel-efficient aircraft for its flying pattern and seeks to develop further fuel efficiencies through changes in its practices.

Stable