EasyJet forecasts good demand for its low fares despite cost of living crisis
EasyJet has said it wants more “certainty” and “stability” in the UK, but expects demand for its lower-cost fares to hold up despite the cost of living crisis.
Johan Lundgren, the airline’s chief executive, said consumers “would continue to protect their holidays where” they could even as their income was squeezed by surging food and energy bills. That meant they would “gravitate towards value”, he added.
“Despite the difficulties that households have, we still know that holidays and travel are on the top of the list when people prioritise what they want to do with their disposable income,” he said on Thursday. “And that is actually a good thing for us because we are primarily known for value for money.”
About half of easyJet’s fares are under £50, a level the company was able to maintain because of its own low costs, Lundgren said. He added that the airline was partly protected against fluctuations in fuel prices, which have continued to rise after the Russian invasion of Ukraine, due to hedging contracts that help lock in prices.
“We do well in tough economic times. Our low cost-base delivers an advantage that our main competitors, legacy carriers, cannot match. And we think that they will struggle in this high-cost environment,” Lundgren said.
“All of this combined, provides us with great confidence in our plans to deliver in the coming year and beyond.”
Lundgren’s optimism seemed at odds with the events of recent weeks. Last month, a UK market meltdown sent the pound to record lows and raised the cost of borrowing after the government’s mini-budget, the unfunded tax cuts of which raised fears over the UK’s economic outlook.
EasyJet’s boss said the airline had been affected by the plunge in sterling, given that some of the company’s costs and debt were in euros and dollars.
“I would like to see that there’s certainty, that there’s stability, and we get back to the point … where we get the pound stronger,” he continued, adding: “Clearly there is uncertainty out there and we just need to see what that will lead to.”
But Lundgren said the airline was already filling scheduled flights next summer, after putting tickets on sale last week. “We were filling the equivalent of more than four A320 aircraft a minute in the opening hours [of the sale] demonstrating the continued demand,” he said.
His comments come as easyJet said it was likely to report a smaller pretax loss of between £170m and £190m for the year to 30 September. While it leaves the airline in the red, it marks a significant improvement from a year earlier when easyJet logged a £1.1bn loss for 2021, as airlines grappled with Covid travel restrictions.
The smaller loss this year includes a £75m hit linked to travel disruption caused in part by staffing shortages after job cuts during the pandemic.
EasyJet’s trading update for the full year to 30 September also accounted for the impact on travel of the Omicron variant as well as the war in Ukraine, which has caused energy costs to soar, including for the airline’s own customers.