Airline pays for chaos
Easyjet takes £15m hit from Gatwick airport drone disruption
Easyjet says bookings remain ‘encouraging’ despite uncertainty (pic: Terry Murden DB Media Services)
Budget airline EasyJet said it will take £15 million hit from the drone disruption around Gatwick airport over Christmas which disrupted flights for thousands of passengers.
The airline suffered £5m in cancellation costs and £10m in customer welfare costs and the incident affected around 82,000 Easyjet customers, leading to more than 400 of its flights being cancelled.
However, the company said that over the three months to the end of December there was a reduced level of cancellations and delays of over three hours despite the drone issue at Gatwick.
It reported robust customer demand driving passenger and ancillary revenue in line with expectations. Underlying revenue per seat was positive, including good ancillary revenue growth. This was offset, as expected, by the impact from last year’s one-off revenue benefits, the dilutive impact of flying at Tegel and new accounting standards delaying the recognition of revenue.
The company said it has made good progress with its cost and operational performance but both were affected by the impact of the drone activity.
Johan Lundgren, chief executive said: “Underlying cost progress is in line with expectations. I am proud of the way our teams worked around the clock to mitigate the impact of the [drone] incident and looked after affected customers.
“Recognition of the easyJet brand continues to grow. We made good progress on our strategic initiatives; holidays, business, loyalty and data during the quarter.
“For the first half of 2019, booking levels currently remain encouraging despite the lack of certainty around Brexit for our customers. Second half bookings continue to be ahead of last year and our expectations for the full year headline profit before tax are broadly in line with current market expectations.”
Total revenue in the first quarter to 31 December 2018 increased by 13.7% to £1,296m. Passenger revenue increased by 12.2% to £1,025m and ancillary revenue increased by 19.9% to £271m.
Passenger numbers in the quarter increased by 15.1% to 21.6 million, driven by an increase in capacity of 18.2% to 24.1 million seats which was slightly lower than originally planned due in part to the drone issues at London Gatwick and to late A321 deliveries from Airbus.
Load factor decreased by two percentage points to 89.7%, as anticipated, due to the one-off increase in prior year late demand and the dilutive impact of Tegel flying.
easyJet’s underlying cost performance has been solid and in line with expectations, before the cost impact of the drones at Gatwick. Headline cost per seat excluding fuel at constant currency increased by 1.0% in the quarter.
EasyJet said it is well prepared for Brexit. It now has 130 aircraft registered in Austria and has made good progress in ensuring it has a spare parts pool in the EU27 and in transferring crew licences, both of which will be completed by 29 March.
Both the EU and the UK have committed to ensure that flights between the UK and EU will continue in the event of a no-deal Brexit. In order to remain owned and controlled by EEA qualifying nationals, as required by EU regulations, easyJet has a number of options, including the use of the provisions contained in its Articles of Association which would permit it to suspend rights to attend and vote at meetings of shareholders and/or forcing the sale of shares owned by non-qualifying nationals as well as other potential actions. easyJet has increased its ownership by qualifying EEA (excluding UK) nationals to around 49%.
Despite the consumer and economic uncertainty created by Brexit, demand currently remains solid and forward bookings for the period after 29 March are robust.