BUDGET carrier EasyJet turned a profit in the traditionally loss-making winter season for the aviation industry for the first time in more than a decade, but it was overshadowed yesterday by a full-year profit warning.
Shares in Europe’s second-biggest no-frills carrier slid almost 10 per cent as it said it would take a £25 million hit from air traffic control strikes in France last month that grounded more than 600 flights.
Bookings are in line with last year and passengers are benefiting as fares fallCarolyn McCall
The alert sparked a rash of City profit downgrades for the full financial year. Numis analyst Wyn Ellis said he was cutting his forecast for EasyJet’s full-year pre-tax profit to £660m from £691m.
The strike-related disruption in the airline’s third trading quarter, a slight decline in trading plus the timing of Easter, has led the group to forecast that quarterly revenues will fall about 4 percentage points, stripping out the impact of currency moves.
However, EasyJet continued to forecast growth in revenue and profit for the full year, as forward bookings progressed in line with last year and said it expected its fuel bill to shrink by up to £120m over the full year due to lower oil prices. Like budget rival Ryanair recently, EasyJet said yesterday that it felt it could keep prices competitive by passing some of the fall in fuel prices on to customers.
The group made an unaccustomed interim pre-tax profit of £7m in the six months to the end of March. This compared with a loss of £53m for the same period last year and was at the upper end of EasyJet’s previous forecasts, which ranged from a loss of £5m to a profit of £10m.
Basic earnings per share came in at 1.3p, against a 10.4p loss per share in the corresponding period a year ago.
The last time EasyJet made a profit in its winter season was in 2002, when it posted £1m of earnings. It said yesterday that its cost per seat fell 1.4 per cent to £38.66 in the latest period, and the group had also benefited from strong October trading.
The carrier’s load factor, a crucial industry measure that shows how full planes are, improved 0.7 per cent to 89.7 per cent.
Group chief executive Carolyn McCall said: “EasyJet has delivered a record performance in the first half of the year by continuing to deliver its strategy of making travel easy and affordable for passengers.
“As we enter the important summer season, forward bookings are in line with last year and, as we predicted, passengers are benefiting as fares fall to reflect a more competitive operating environment and lower fuel costs.”
She said that the company had taken £21m out of its cost base during the year through various efficiency initiatives.
The airline boosted its capacity by 20 per cent and launched 12 new routes, including Edinburgh to Funchal and Gatwick to Stuttgart.
During the six months to 31 March, the group – which has a fleet of 230 planes – flew 28.9 million passengers, up 3.8 per cent on a year earlier.
EasyJet said that the strength of sterling cost it about £40m during the first trading half, and expected the financial hit to be about £20m over the full year.
Shares slumped 179p, or 9.8 per cent, to 1,654p in response, but some analysts thought the reaction to yesterday’s statement and the resulting profit downgrades were overdone.
“The scale of the reaction to the outlook seems somewhat excessive,” said Richard Hunter, head of equities at Lansdown Hargreaves Stockbrokers.
However, another City analyst said: “While the half-time performance was unexpectedly good, the gloss was certainly taken off by the one-off provision.”