The pace of Flybe’s revival has been thrown into doubt after the regional airline reported a drop in passenger revenue and said it would only just break even in 2015.

Its shares slumped 23% to 69.4p after the gloomy third-quarter trading update, their lowest level for more than a year. The airline said revenues had dropped 3.8% in the quarter, while forward bookings for spring suggested a further squeeze at 3% lower revenue per seat.

The Exeter-based carrier has haemorrhaged money in recent years but embarked on a turnaround plan including cutting staff and refocussing its route network, returning to slight profit in 2014.

It admitted that its plans to get rid of surplus aircraft was behind shedule, leving Flybe with nine more Embraer planes than it needs for another year at a cost of £26m.

Saad Hammad, Flybe’s chief executive officer, said: “Flybe’s improvement in its core UK business continues to progress. Only a year into our three-year transformation we now have a platform which enables us to compete in a tough environment where the consumer demands value. We are now well positioned to continue our positive momentum towards delivering sustained profitability and value to shareholders.”

The airline conceded that competition at London City airport, where it has signed a five-year deal, was seeing slower take-up than anticipated across new routes that were launched to some fanfare only three months ago. It recently announced it would axe one of the new routes, from London to Inverness, and redeploy its planes to other services.

Flybe said that the fall in jet fuel prices would have minimal impact on its financial performance until 2016 due to forward buying at higher rates.