EasyJet may raise peak fares on journey to profit
Short-haul airline EasyJet may need to raise peak fares as it claws back losses built up during the pandemic.
The company posted EBIT of £3 million for the 12 months to the end of September (2021: 1.036bn loss) and is aiming to be back in profit next year.
However, its shares fell the shares fell or 10.25p (2.6%) yesterday to close at 383p after its headline loss before tax for the year came in at £178 million (2021: £1.136bn) which includes a £64m loss from balance sheet revaluations. It is the third successive annual loss and no dividends have been paid.
Operational performance in Q4 was better than Q4 2019, with fewer on the day cancellations .
Johan Lundgren said: “Over the next year, we are targeting customer growth and are well placed to drive returns and margins while maintaining a rigorous focus on cost. With one of the strongest balance sheets in European aviation, we are ready to take opportunities as they present themselves.
“We have a clear strategy to drive returns for our shareholders and have significant confidence in our plan today and that it will deliver going forward.”
Russ Mould, investment director at AJ Bell said: “EasyJet is doing everything it can to accelerate its recovery from Covid, but there just isn’t enough momentum to swing the company back to positive earnings.
“It has now suffered annual losses for three years in a row and investors have had to stomach share price weakness and no dividends for that period.
“While forecasts suggest it will move back into profit during its new financial year (ending 30 September 2023), EasyJet’s post-pandemic journey has had more twists and turns than a rollercoaster at Alton Towers.
“It is trying to put across a positive message: losses are narrowing, it has high levels of cash to provide a buffer if the recovery takes longer than expected, and the holidays business is profitable and growing. In difficult times such as now, consumers will seek value for money and EasyJet believes its proposition ticks the right boxes.
“However, if you exclude peak periods like half-term, Christmas and New Year, the airline is having to work extra hard to fill planes.
“That suggests ticket prices will have to come down during non-peak periods to entice people to book, which is great for the customer but bad for the airline when you consider that cost pressures are still intense on the aviation industry.
“If that happens, it’s fair to assume that peak air fares will go even higher to compensate.”