Turbulent times

Easyjet shares dip but it sees a rise in profits on the horizon

A PERSISTENT oversupply of airline seats has put downward pressure on low-cost carrier easyjet in spite of the airline saying profits would be at the top end of its guided range thanks to record summer passenger numbers.

Investors sent the shares down 1.6pc to £12.63, after the Luton-based company’s revenue per available seat – a key performance metric for airlines – fell 3.7pc in the final quarter of its trading year. Over the past six months, the number is down 1.4pc.

The fall comes as the airline industry struggles with too many available seats on flights. While some airlines have cooled the level of seat growth they had planned since the Brexit referendum last year, the low oil price has helped carriers to keep a higher number of seats in the air than they might otherwise have been able to do.

A vicious price war has also led to carriers fighting to cut fares. easyjet said prices for flights to beach destinations from the UK in particular had fallen sharply.

However, the low fuel price has helped easyjet’s costs. Its costs per seat including fuel will drop 4.4pc for the year to Sept 30.

easyjet said it expected its pre-tax profits for the year to be between £405m and £410m, which is at the upper end of its previously guided range. This was helped by record passenger numbers of 24.1m in the past three months, which meant it hit a record load factor – a measure of how full its planes are on average – of 95.6pc.

The carrier said its profits were hampered by a £100m foreign exchange hit, as the weak pound makes buying fuel in dollars more expensive.

Many major airlines, including easyjet, use financial derivatives to help smooth out the impact of fluctuations in global currency markets on their fuel bills.

Gerald Khoo, a Liberum transport analyst, said easyjet should see a benefit in 2018 from the end of “expensive hedges” it had previously entered into.

The company said its fuel bill should fall by between £125m and £145m in the next year. In spite of pressures in

‘We have opportunities to grow and strengthen our positions in Europe’s leading airports further’

the airline industry, with the collapse of Monarch Airlines this week and a raft of cancellations announced by Ryanair, easyjet said it would increase its seat capacity by 6pc in the next 12 months even though it expected downward pressure on its ticket prices to persist.

Dame Carolyn Mccall, the company’s outgoing chief executive who is due to join ITV next year, said the current turmoil in the sector provided her company with “opportunities to capitalise on its strong customer proposition and grow and strengthen our positions in Europe’s leading airports still further”.

The airline reports its full-year numbers on Nov 21.