EasyJet warns of a tough winter ahead

BUDGET airline easyJet yesterday warned the aviation industry is in for a tough winter as it revealed its pre-tax profit halved over the past year despite customers trading down to cheaper transport options.<br /><br />Reported pre-tax profit at the airline fell 50.4 per cent to &pound;54.7m in the year to September, down from &pound;110.2m in 2007, while revenue grew 12.9 per cent to &pound;2.67bn.<br /><br />Chief executive Andy Harrison said the results had been hit by the rising cost of fuel, but was upbeat about the airline&rsquo;s prospects, saying he expects to see &ldquo;substantial profit improvement in 2010&rdquo;.<br /><br />The group flew 45.2m passengers over the year, an improvement of 3.4 per cent year-on-year, while its load factor &ndash; a measure of how full its planes are &ndash; was 85.5 per cent.<br /><br />EasyJet, which was recently involved in a high-profile spat between management and its largest shareholder Sir Stelios Haji-Ioannou over the rate of its growth, said it had fixed its expansion target at 7.5 per cent per annum over the next five years.<br /><br />&ldquo;This is a unanimous board strategy &ndash; it represents the Goldilocks philosophy of trying to grow not too fast and not too slow,&rdquo; said Harrison, who added that the group had come to the decision that a faster growth rate might impact yields.<br /><br />EasyJet also said it welcomed the decision to break up airport operator BAA, but warned the industry would need to guard against Gatwick&rsquo;s new owner, infrastructure fund GIP, exploiting its market power.<br /><br />&ldquo;Selling a monopoly from A to B will not change the fact that it is a monopoly,&rdquo; said Harrison.<br /><br /><strong>HENK POTTS </strong>BARCLAYS WEALTH<br />EasyJet&rsquo;s business model means it should be attractive to business users looking to save on air fares, and this is a segment that management are targeting. But unemployment lags economic trends, which gives rise to concern about aviation (and other transport) demand. Hence, filling seats may put pressure on pricing in the future.<br /><br /><strong>GERT ZONNEVELD </strong> PANMURE GORDON<br />Forward bookings are broadly in line with last year but unsurprisingly, EasyJet sees a tough winter ahead and expects revenues per seat to be down a few percentage points. However, as economic conditions improve, we expect the airline to benefit strongly from a recovery in consumer spending to more normal market conditions.<br /><br /><strong>DOUGLAS MCNEILL &nbsp;</strong> ASTAIRE SECURITIES<br />EasyJet is an airline that is performing well and is widely admired for it, not least by the stock market, which has marked the shares up 40 per cent over the year to date. The general assumption is that last year was the bottom of the cycle, which was certainly the case in fuel price terms but may turn out not to have been the case for demand.