EasyJet: Extra payout for investors as profits rocket

EasyJet's results were seen as a triumph over arch-rival Ryanair. Picture: TSPL
EasyJet's results were seen as a triumph over arch-rival Ryanair. Picture: TSPL
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BUDGET airline EasyJet will return more than £300 million to shareholders after a move to allocated seating helped it attract more affluent passengers.

Pre-tax profits at the carrier soared 51 per cent to £478m for the year to the end of September, which was at the upper end of recent guidance.

Revenues were up more than 10 per cent at £4.3 billion, and the firm ended the financial year with £1.3bn of cash.

Chief executive Carolyn McCall said the move to a seating policy more akin to the legacy carriers, along with a growing reputation for decent if “no frills” service, meant the average age of customers had edged up to about 42.

“That’s good because they do have more disposable income,” she said. “There has been an increase in [customers] who refused to even contemplate flying EasyJet, older than mid-forties, who would want an allocated seat and would not want to be in any kind of scrum for boarding.

“Those are the people who we have definitely taken a barrier away from.”

The company has also increased its appeal to business passengers, and now claims more than 19 per cent of the business market on its routes.

McCall, right, said there was no target to increase that penetration because it would mean cutting prices. “It’s more important to get the margin on business passengers. They do spend more on their ticket,” she said.

EasyJet’s results were seen as a triumph over arch-rival Ryanair, which was recently forced to moderate its extreme no-frills approach as it warned over winter revenues.

However, McCall said that, because there is relatively little overlap between the two companies on routes, EasyJet still sees former state airlines such as Alitalia, BA and Lufthansa as its main competitors and will continue to try and poach customers by beating them on price.

She said the latest results reflect EasyJet’s “continued structural advantage in the European short-haul market against both the legacy and low-cost competition”.

She added: “As evidence of our continued confidence in the future prospects of the business, the board has recommended to return £308m to shareholders through the combination of an ordinary and special dividend.”

The board is proposing a special dividend of £175m, or 44.1p a share. Subject to shareholder approval, that would be paid on top of the company’s regular dividend of £133m or 33.5p a share, based on its policy of paying out one third of annual profit after tax.

Marc Kimsey, senior trader at Accendo Markets, said: “EasyJet has demonstrated the subtle difference between offering value and cutting corners.

“Where peer Ryanair has been plagued with customer service complaints and safety concerns, EasyJet has been on hand to offer a refreshing alternative – flexible ticketing and poaching of top business routes has attracted holiday makers and corporate customers alike.”