EasyJet flies in line with expectations but says weaker pound will eat into its profits

 
Rebecca Smith
The airline is navigating good growth as it weathers a Brexit storm
The airline is navigating good growth as it weathers a Brexit storm (Source: Getty)

New Year, new EasyJet?

The jury's out. It might have had a difficult 2016 following the Brexit vote in June, but the airline reported a first quarter in line with expectations and solid growth.

There's still expected Brexit turbulence though: the weak pound will mean its 2017 profit takes a larger than expected hit to the tune of £105m.

And the airline will shell out £10m for an Air Operation Certificate in another EU state to secure flying rights of 30 per cent of its routes, while it said weak sterling and the impact of fuel combined are £35m worse than previously expected.

Shares slumped more than seven per cent in early trading this morning to 997.50p at the time of writing.

The figures

Total revenue rose 7.2 per cent to £997m, which EasyJet said reflected the rise in passengers carried for the period.

Revenue per seat fell 8.2 per cent at constant currency to £51.64 per seat, though it was better than the company has previously anticipated.

Passenger numbers were up 8.2 per cent to 17.4m, driven by a growth in capacity of 8.6 per cent to 19.3m seats. Load factor edged down 0.3 per cent though, to 90 per cent.

Why it's interesting

​In November, the budget airline cut its dividend when profits fell 27 per cent off the back of the Brexit vote. It blamed “unprecedented external events” for the difficulties.

And “severe weather conditions” in December threw another spanner in the works, though Easyjet said it achieved on time performance during the quarter of 79 per cent.

It's making post-Brexit plans, but has noted the referendum vote will be costly: exchange rate movements are likely to have around a £75m adverse impact compared to the six months to 31 March last year, and it expects 2017 full-year profit to take a larger than expected £105m hit.

EasyJet also reiterated its plans to establish an Air Operator Certificate (AOC) in another EU member state, which it said will “secure the flying rights of the 30 per cent of our network that remains wholly within and between EU states, excluding the UK”. That’s expected to cost around £10m over two years and up to £5m incurred this financial year.

What the company said

EasyJet’s chief executive Carolyn McCall said:

EasyJet has delivered a solid first quarter with revenue, cost and passenger numbers in line with expectations. This is despite a tough pricing and operating environment.

The weakness of sterling and the impact of fuel combined are £35m worse than previously expected but EasyJet has made good progress in reducing costs in those areas where we have more control such as engineering, maintenance, non-regulated airports and overheads.

The underlying year-on-year revenue per seat trend continues to improve, supported by resilient demand across all our European markets. Forward bookings are ahead of last year.

In short

EasyJet is strapping in for the long-haul - there's considerable turbulence on the way, but it's a solid start to the year in line with expectations.

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