Budget airline Flybe's chief executive to step down immediately

By Esha Vaish

(Reuters) - Flybe Group Plc (FLYB.L) said Chief Executive Saad Hammad would step down immediately, ending a more than three-year stint that marked the airline's return to profitability.

The company's shares tumbled 14.8 percent to 34.80 pence at 1143 GMT on Wednesday.

Flybe, which connects British regional airports to London and other European cities, said Hammad's resignation was by "mutual agreement".

The departure of Hammad, a former executive at rival easyJet (EZJ.L) and Air Berlin (AB1.DE), leaves Flybe rudderless at a time when European airlines are grappling with increased economic uncertainty after Britain's vote to leave the European Union.

Several airlines in the region have issued profit warnings as they navigate slow demand and fierce competition in fares.

Although Flybe reported a 5 percent rise in first-quarter passenger revenue in July, it warned that Brexit and a string of deadly attacks across Europe could have a "materially adverse impact".

Under Hammad's leadership, Flybe has returned to profitability by drastically cutting jobs and wages, selling airport slots and exiting unprofitable routes.

Hammad was brought on board in 2013 to help Flybe counteract soaring fuel costs, falling passenger counts and higher airport charges. The turnaround, most notably, involved the airline quitting its main London hub at Gatwick airport.

Analysts said Hammad's surprise departure could allow Flybe to set out clearer goals as it heads into another bout of turbulence.

"The company needs to set out more clearly how they're going to grow the business and where they can get to in terms of margins and cash generation over the medium term ... I think it probably needs a fresh set of eyes just to take a look," Cantor Fitzgerald Europe analyst Robin Byde told Reuters.

Simon Laffin, Flybe's non-executive chairman, will step up as executive chairman as the airline scouts for a new boss.

Laffin said Flybe remained "well placed" as the aviation industry faces a "challenging market environment".

In Flybe's statement on Wednesday, Hammad said, "Now is the right time for me to move on to a fresh challenge."

Hammad did not respond to an email seeking comments, while a Flybe spokesman declined to comment beyond the statement.

(Reporting by Esha Vaish in Bengaluru; Editing by Saumyadeb Chakrabarty)