Main Menu

Profit warning from airline

Sterling and terror fears eat into EasyJet profits

Carolyn McCallPrice cutting has enabled EasyJet to carry record numbers of passengers but terrorism fears and the slide in the pound have taken a big slice out of its earnings.

Full year profit before tax is expected to be lower than the£497 million to  £516 m expected. It will be the first fall since 2009.

Price cutting has helped lure passengers, For the three months ending 30 September the airline carried a record 22 travellers and its planes were almost full, with a load factor of 93.9%.

The company said it has “performed strongly in a difficult operating environment for all European airlines”.

In the three month period it has been affected by major disruption, exchange rate fluctuations, the impact on demand from terrorist events and the low cost of fuel continuing to drive increased market capacity.

Against those conditions easyJet has grown capacity by 6.1% in the quarter compared to prior year.

Cost per seat excluding fuel at constant currency is expected to decrease by 1.1% for the full year, slightly better than previous guidance. Cost per seat at constant currency including fuel is expected to decrease by 4.6%.

EasyJet, which has today announced a record number of flights in and out of Scotland next year, said it remains focused on cost and has continued to drive structural improvements, such as in maintenance and overhead costs. 

The slump in sterling since the EU referendum result has had a  adverse impact on the company.

Foreign exchange rate movements are now expected to have cost the company £90 million  to the financial year, an increase of £35 million since 23 June.

This will be partly offset by a lower fuel bill for the second half of the financial year. It is expected to decrease by between £75m and £80m compared to the six months to 30 September 2015. 

Outlook

EasyJet’s full year profit before tax is expected to be the range of £490m to £495m for the year to 30 September. It remains committed to declaring a full year dividend based on a payout ratio of 50% of post-tax income.

The company continues to see the current market environment as “an opportunity to build and strengthen its strategic position for the long term”.

As previously guided, capacity is expected to grow by around 8% in the current financial year.

Approximately 45% of seats are now sold for the first quarter, in line with last year. Revenue per seat in the first quarter continues to be down year on year and is currently expected to be broadly in line with the reduction seen in the fourth quarter 2016.

Cost per seat excluding fuel and at constant currency is currently expected to increase by around 1% for the year, reflecting increased investment in operational resilience as well as the timing of longer term cost savings.

It expects the foreign exchange “headwind” to continue into 2017 mainly driven by weaker sterling against the US dollar, affecting the cost of fuel. The total expected foreign exchange impact for the year to 30 September 2017 is around £90m.

Carolyn McCall (pictured), easyJet chief executive, said: “EasyJet continues to attract record numbers of passengers.

“We have been disproportionately affected by extraordinary events this year but our excellent network, cost control and revenue initiatives and our strong balance sheet underpin our confidence in the business.  

“The current environment is tough for all airlines, but history shows that at times like this the strongest airlines become stronger.

“That is why we will continue to invest for the long term success of the business, establishing even stronger market positions, delivering excellent customer service and establishing new revenue opportunities for the future.”



Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.