EasyJet recovering after turbulent period
EASYJET is one of Europe’s leading airlines, operating more than 800 routes across 30-plus countries. It has a fleet of 240 aircraft, which carries more than 70 million passengers a year.
It has coped well with a number of headwinds and is now planning to raise its dividend payout to shareholders, putting the shares on a pretty attractive yield.
The group’s results for the six months to the end of March show a broadly flat profit outcome of £5million before currency movements are factored in.
But a weaker euro means that, overall, the airline posted a £24million loss. It wasn’t just currency movements that hit revenues, either – terrorist activity also played a part, with the closure of Sharm El-Sheik and the aftermath of the Paris attacks depressing revenues by about 4 per cent.
EasyJet is finding that lower seat prices, driven by the industry passing down saving costs from cheaper fuel, are supporting consumer demand.
Overall, trading conditions are more competitive and will probably remain so for the medium-term future.
Fuel costs are expected to be about £170million to £180million lower this year than last, but currencies are likely to reduce revenues by some £55million for the full year, given current rates. Capacity, in terms of seats flown, is expected to be about 6.5 per cent higher over the summer season.
So far, EasyJet is coping fine, with rising passenger numbers offsetting lower unit revenues. Hopefully, there will be no further disruptions to traffic in the remainder of the year, though this remains an ongoing risk for all airlines.
As the group builds scale at airports, it is able to negotiate long-term deals with the operators and ground handlers, further driving down costs. With the company holding more than a billion pounds of cash on its balance sheet and having confidence in its future success, the board have decided to increase the dividend payout ratio from 40 per cent to 50 per cent of annual earnings from the current financial year onwards.
That puts the stock on a rather enticing yield of close to 5 per cent at current prices.