Shares in Flybe plunged nearly 40 per cent in morning trading after the airline issued a profit warning citing “increasingly adverse fuel and currency impacts” as it went on to forecast softer market conditions in the second half of the year.

The low-cost UK carrier is expecting worse-than-expected losses of around £12 million for the year to the end of March 2019, even with a £10m one-off boost to its accounts connected to a lease.

In its latest half-year update, Flybe said as well as an expected £29m impact from fuel costs and a fall in the value of sterling, it was also seeing consumer demand weaken in domestic and near-continent markets in recent weeks.

Christine Ourmieres-Widener, chief executive of Flybe, said: "We have made progress in driving our unit revenues across the summer season, but we are now seeing a softening in the market.

"We are reviewing further capacity and cost-saving measures while continuing to focus on delivering our sustainable business improvement plan."

She said: "We continue to strengthen the underlying business and remain confident that our strategy will improve performance."

The firm also said revival efforts had helped its load factor, a measure of how well it fills its planes, by 7.2 percentage points to a record 86.6% over the quarter to the end of September, while passenger revenue per seat lifted 6.8%.

Flybe was also cited in part as helping boost record numbers at Edinburgh Airport in September.

Gerald Khoo, airline analyst at Liberum, said it is clear that "external industry-wide headwinds from weaker demand and a more challenging environment on fuel and foreign exchange continue to more than offset management's actions".

Shares dropped by as much as 39% to 20.3p after it issued the profit alert.