Don’t judge growth plans yet

Elizabeth Fournier
DEPSITE stronger than anticipated volume growth in February, shares in easyJet are yet to recover from the 16 per cent tumble they took in mid-January, when the airline warned that first-half losses could double to £160m due to fuel costs and lost revenue from poor winter weather.

Though total revenue for the fourth quarter of 2010 was up by 7.5 per cent at £654m, disruption costs were bigger than anticipated, running to £31m.

The continued downward trend since January reflects the fact that despite posting a high load factor of 86 per cent for February – up 3.1 per cent to 3.83m from 3.39m in 2010 – investors are concerned that easyJet’s rapidly expanding fleet means returns won’t match costs.

But it’s not time to sell yet. EasyJet’s winter 2011 schedule should provide investors with an opportunity to assess management’s longer-term prudence, and though target prices are falling, most brokers remain neutral on the stock.