Easyjet not flying high, but the turbulence looks behind it
Comment Martin Flanagan
Will Johan Lundgren, the travel industry veteran from tour operator TUI who succeeds Carolyn Mccall as chief executive of Easyjet next month, prove one of Napoleon’s “lucky generals”? He at least seems to have got the trait of good timing.
Mccall is leaving after a challenging year for the budget airline industry, including a price war and the post-brexit vote slump in the value of sterling. Easyjet’s annual profits are down 17 per cent.
The hit would have been worse but for the silver lining of extra passengers due to rival Ryanair turning in a shambolically crop-dusting performance in the final quarter of the year as hundreds of flights were cancelled due to management’s miscalculation of pilot leave. My enemy’s enemy is my friend even when it is incompetence.
But the good news for Lundgren is that things at Easyjet appear to be on the up. Trading so far in its new financial year looks pretty decent, benefiting from further bad news at rivals, namely, the collapse of Luton-based carrier Monarch, Alitalia’s administration and Air Berlin’s demise.
Easyjet expects up to mid-single digit growth in underlying revenue per seat in the first quarter of its new financial year, while forward bookings are ahead of last year at 88 per cent for Q1 and 26 per cent for Q2. Rising costs and lower prices, a backdrop for the past couple of years, are also likely to reverse as trading conditions ease going into 2018.
A bounce of 5 per cent in the airline’s shares yesterday said it all about the market being alive to a possible break in the clouds as Lundgren takes over. Of course, gaining some altitude is not the same as a soaraway performance: we should not get carried away with grandiose revenue and earnings prospects.
And, as Ryanair begins to emerge from the turmoil, and the carve-up of slots from stricken rival carriers takes effect, short term zero-sum gains for Easyjet from the recent disorder will moderate.
But, even so, the view has cleared. Mccall may not be leaving on a high as far as performance is concerned, but she has been a decent executive pilot and the next best thing for an outgoing boss is to leave a company with a decent outlook. She has done that.