Airline orders more jets as profit surges
LONDON: British no-frills airline easyJet said demand for European flights was resilient and it was ordering 36 more planes to drive its expansion after reporting an 18% jump in annual profit yesterday.
Chief executive Carolyn McCall said, however, that a series of shocks with the potential to hit travel, such as the attacks in Paris on Friday and a Russian plane crash over Egypt in October, were having an impact.
“You will always see a cooling off period but you also see quite a quick resumption to travelling again,” McCall said on a call when asked about travel to France.
Overall, the company said customers had continued to buy tickets, with forward bookings in line with last year.
For the winter, easyJet’s bigger low-cost rival Ryanair has talked of a price war in the cut-throat European market, as airlines raise capacity and compete against each other in a lower fuel cost environment.
But easyJet forecast only a “slight decline” in revenue per seat on a constant currency basis for the six months to the end of March, challenging Ryanair’s view.
easyJet said it would maintain profit momentum by boosting passenger numbers 7% a year, controlling costs and exploiting its slots at major airports, an area where Ryanair is playing catch-up having historically focused on minor airports.
easyJet is trying to expand in France, which accounts for an estimated 20% of its capacity, and it could see a short-term setback after Friday’s attacks in Paris, which killed at least 129 people and were claimed by Islamic State.
“Our view is that demand may be soft in the coming months as a result of the attacks but, as previous similar events have shown, this will recover quickly,” Cantor analyst Robin Byde said.
easyJet said the new planes reflected its robust trading and the profitable opportunities it sees in its markets, adding that current market expectations for its 2016 financial year were in line with the board’s forecast.
For the year ending on Sept 30, 2016 analysts expect easyJet to report pre-tax profit of £746 million ($1.1 billion), building on the 18% rise in pre-tax profit in 2015 to £686 million which it reported yesterday.
That was in line with a forecast of between £675 million to £700 million given in September.
It said the new plane order was part of a decision to exercise rights to 30 A320neos in a 2013 deal with Airbus Group SE, plus an order for six more current generation A320s.