EasyJet shares tumble after £35m knock to finances

Low-cost airline EasyJet has revealed a fresh £35 million hit as it takes a hammering from the weak pound, while it also outlined the impact of the Christmas market attack in Berlin.
EasyJet is cutting costs to weather the tough trading conditions. Picture: Gareth Fuller/PA WireEasyJet is cutting costs to weather the tough trading conditions. Picture: Gareth Fuller/PA Wire
EasyJet is cutting costs to weather the tough trading conditions. Picture: Gareth Fuller/PA Wire

The budget carrier said the weak pound was now expected to cost it about £105m over its 2016-17 financial year, up from the £90m estimated in November, with fuel expenses also falling by less than expected.

On top of an extra £35m fuel and pound bill, it also saw a financial impact in the “low millions” from the deadly truck attack in Berlin, which killed 12 people on 19 December, as bookings to the city dropped in the immediate aftermath.

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It is also forking out £10m for an air operation certificate as it sets up a new operating company in mainland Europe and applies for a new licence to secure flying rights of 30% of its routes after Brexit.

Shares tumbled by 9 per cent after the update.

The airline said revenues per seat fell 8.2 per cent as it continued to slash prices in the face of competition from the likes of rival Ryanair, but the group said this marked an improvement.

It is cutting costs across the group to weather the difficult trading from the weak pound and increased competition as part of a group-wide review.

EasyJet chief executive Carolyn McCall said the airline delivered a “solid” first quarter to 31 December in the face of “tough” conditions.

She added: “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 airline carried 8.2 per cent more passengers in the Christmas quarter, at 17.4 million, but its load factor – a key industry measure of how well airlines fill their planes – fell to 90 per cent, down from 90.3 per cent a year earlier.

The group added that about 56 per cent of expected bookings for the second quarter have now been secured, which is “slightly ahead” year-on-year.

But it confirmed it is expecting revenue per seat for the first half to decline by “high single digits”, knocked by the timing of Easter and the impact of the Berlin attack.

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Ken Odeluga, market analyst at City Index, said shares in the group plunged as “widening exchange rate pain is once again taking a toll on sentiment”.

He said: “After a bruising 2016, EasyJet investors have understandably latched on to the continuing drag on profitability from Brexit-hit sterling.”

EasyJet revealed its first fall in annual profits for six years in November after being buffeted by the plunging pound, terrorism fears and air strikes.

The group posted a 27.9 per cent tumble in pre-tax profits to £495m for the year to 30 September, after the sharply weaker pound cost it £88m and it suffered a blow of around £150m from “unprecedented” events.

Sir Stelios Haji-Ioannou, founder of EasyJet and the airline’s largest shareholder, hit out at the carrier’s strategy after the update sent shares plunging.

He said that his EasyGroup would vote a “token” 15 million shares against the re-election of the airline’s chairman, John Barton – representing around 3 per cent of EasyJet’s stock – in protest at its plan to add more planes to its fleet.

Sir Stelios added: “Clearly other investors are extremely unimpressed by the decline in the revenue per seat. I am not trying to unseat John Barton, but we do want to send a public message to focus investor attention on the fleet plan presented by the management twice yearly alongside the results presentation.”