Easyjet cruises towards higher profits
● But analysts highlight tough backdrop for the low-cost carrier
Budget airline Easyjet has flagged solid trading in the final quarter as demand was boosted by strikes at rivals Ryanair and British Airways.
The carrier said it expects profit before tax for the year to September to be at the top end of company forecasts – between £420 million and £430m.
Easyjet said it delivered an 8.6 per cent surge in passenger numbers to 96 million for the year after it increased its capacity by more than 10 per cent. However, total revenue per seat slipped by about 2.7 per cent as airlines pulled prices down due to heavy consolidation in the sector.
In the second half of the year, total revenue per seat only decreased by 0.8 per cent as it benefited from increased demand due to the strikes by Ryanair and BA pilots.
Easyjet’s cost performance remained strong during the fourth quarter, despite “difficult disruption” in the sector during the period as tour operator Thomas Cook collapsed.
Rises in fuel costs, increased capacity and the weakness in the pound resulted in a 12 per cent jump in the headline costs for the full year, the airline said.
The group noted that costcutting initiatives were also a driving force behind its performance in the quarter which was affected by disruption, including storms across Europe and technical issues experienced at Gatwick Airport.
The airline said bookings for the first quarter of the 2020 full year are in line with expectations, while it expects capacity to be 2 per cent higher than the same period in 2019.
Chief executive Johan Lundgren said: “Easyjet has continued to perform in line with expectations, despite challenging market conditions.
“As a result of our self-help initiatives and the increased demand due to disruption at British Airways and Ryanair, we anticipate achieving headline profit before tax for the full year 2019 of between £420m and £430m.
“We have continued to invest in operational resilience, with the programme successfully reducingtheimpactofdisruption on our operations.”
John Moore, senior investment manager at Brewin Dolphin, said: “The airline industry has been going through turbulent times between the collapse of Thomas Cook and strikesandfinancialtroubleat other operators.
“Yet, despite this, Easyjet has performed steadily and expects to deliver profits towards the upper end of guidance.
“Although not mentioned in [the] statement, Brexit will no doubt land with a bump, while currency fluctuations and volatility in the price of oil are already having an impact. Nevertheless, Easyjet should emerge from a tough period in a relatively robust position.”
Richard Hunter at Interactive Investor noted: “The airline industry is tough at the best of times, being one where there are as many factors outside a company’s control as within. The industry remains one typified by an intensity of competition which has seen a number of smaller players go to the wall over recent years.
“The market consensus of [Easyjet’s] shares as a hold is indicative of mixed views on its prospects, which is likely to remain the case until there is some improved visibility on progress.”
“The airline industry is tough at the best of times, being one where there are as many factors outside a company’s control as within”
RICHARD HUNTER