EasyJet promises growth as sales hit by global turmoil
Terror attacks, military coup and EU poll all impact budget airline
EASYJET has said it will continue to grow in Scotland and the UK in spite of an “uncertain economic and operational environment”.
Ten per cent of the low-cost airline’s total capacity growth was focused in Scotland in its third quarter, helping it to carry 20.2 million passengers in the three months to June 30, up 5.8 per cent on a comparative basis.
But revenue per seat dropped 8.3 per cent, leading to a 2.6 per cent drop in revenue for the quarter to £1.2 billion.
In a trading update, easyJet warned that recent events in Turkey and Nice meant revenue per seat trajectories in the fourth quarter remained uncertain.
The company noted that increased seat capacity from its expanded 253-aircraft fleet was offset by the impact on yield of overall market capacity and cancellations as a result of “significant external events”.
These events included the Brussels terror attack and Egyptair tragedy, in addition to air traffic control strikes and congestion disruptions, runway closures at Gatwick airport and severe weather – all leading to 1,221 cancellations, up from 726 the year before.
Passengers on cancelled flights were offered seats that would otherwise have been sold for a higher yield closer to departure.
In June alone, easyJet suffered 852 cancellations arising from 11 air traffic control strikes.
“More recently, currency volatility as a result of the UK’s referendum decision to leave the EU as well as the recent events in Turkey and Nice continue to impact consumer confidence,” said chief executive Carolyn McCall.
The company noted that there was “continuing cooling demand” across the network due to the effects of terrorism and the Egyptair tragedy.
It added that the geopolitical situation in the Middle East and north Africa is causing airlines and tour operators to shift capacity to the western Mediterranean, resulting in an over-supply of seat capacity that is reducing yields in those markets.
Approximately 65 per cent of expected bookings for the fourth quarter have been secured, with booked average revenue per seat for the quarter declining by around 7.5 per cent at constant currency rates.
Capacity is expected to grow in the fourth quarter by six per cent and while the company couldn’t forecast per seat trajectories, its cost per seat for the year is up 4.1 per cent to £51.70, driven by lower fuel costs. “We are focused on the opportunities that are inevitable from a tougher environment,” said Ms McCall. “The easyJet team is confident in its ability to navigate the period ahead and drive longterm advantage.”
The company already has a team in place that is actively engaging with regulators and government to secure European flying rights.
The airline said it “remains committed to the UK, its largest single market,” but it does have a contingency plan to obtain an EU Airline Operator Certificate (AOC) in the event that the UK Government can’t secure a continuation of the current aviation deregulation in its negotiations with Europe.
Dublin-based Ryanair has less exposure to Brexit than Lutonbased easyJet, but that company recently put its UK plans on hold, announcing it did not expect any of the 50 new aircraft joining its fleet next year to be deployed in the UK, directly as a result of the Brexit vote.
And earlier this week rival budget carrier Wizz Air halved its intended growth in the UK, focusing instead on non-UK routes. This, it said, was as a result of the weakness of Sterling.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, highlighted that easyJet puts the free movement of EU citizens into practice on a daily basis, “which makes the possibility of losing access to European airspace a real problem”.
He added: “However, while Brexit presents a long-term challenge for the business, near-term hurdles are proving just as challenging.”