EasyJet upgrades profit forecast after strong Easter

Budget airline EasyJet has upgraded its annual profit forecast after a strong Easter helped boost third-quarter revenues.

But EasyJet's profits are still set to fall short of last year's total. Picture: Michael Gillen
But EasyJet's profits are still set to fall short of last year's total. Picture: Michael Gillen

The carrier reported a 16 per cent rise in sales to £1.39 billion for the three months to the end of June, with passenger numbers increasing by 10.8 per cent to 22.3 million.

As a result, EasyJet said full-year pre-tax profits are expected to come in between £380 million and £420m, higher than earlier forecasts.

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Outgoing chief executive Carolyn McCall, who will leave the company to take the top job at ITV in January, said: “Our purposeful and disciplined growth continues to strengthen our market positions and we are seeing an underlying improving revenue trend.

“Although we expect capacity to continue to put pressure on yields, our progress this year has enabled us to upgrade this year’s profit-before-tax forecast and demonstrates that, after a difficult 18 months of external challenges, easyJet once again has positive momentum.”

However, profits will still come in below last year’s £495m, when the firm was stung by the plunging pound.

McCall, who has headed up the low-cost airline since 2010, leaves the low-cost carrier at a difficult time for the sector, with Brexit storm clouds gathering over the travel industry. The pound’s collapse has meant fewer people travelling overseas and, more starkly, British airlines are at risk of being grounded unless Tory ministers strike an aviation deal with the EU before March 2019.

To mitigate the impact, EasyJet last week confirmed that it has applied for a new air operator’s certificate in Austria to allow it to continue flying in the European Union after Britain’s divorce from the bloc.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The problem is that EasyJet is struggling to get its new passengers to pay the same as the old ones did.

“Despite an improvement in the third quarter, the group still expects revenue per seat to decline by 2 per cent across the second half as a whole and that suggests that the key summer period has been seeing some significant discounting.

“For now, profitability is being supported by the steady slide in fuel prices. There’s no guarantee fuel will stay cheap though, and at the moment the group is struggling to land more sustainable cost savings elsewhere in the business, despite its increased scale.”

EasyJet yesterday appointed Royal Mail chief executive Moya Greene to its board earlier than planned as it speeds up the search for McCall’s successor.

Greene, who had been poised to join the budget airline in September, has now taken up her position of non-executive director to “support the chief executive search process”.

Terry Pullinger, deputy general secretary of the Communication Workers Union, which represents Royal Mail workers, said: “It is extremely concerning, at a time when the business is facing huge challenges, that the chief executive of the company should have enough time on her hands to take another job.

“It will be equally offensive to our members that a highly paid member of the Royal Mail board and leader of Royal Mail Group is taking what one assumes is another lucrative contract whilst effectively saying to Royal Mail employees that they are overpaid, lucky to have a job and should accept imposed huge reductions in their pension promise.

“This feels symptomatic of the small number of industry leaders in the UK that share non-executive positions on a number of boards and are highly rewarded for shrinking rather than growing their businesses and achieving profits and bonuses as a direct result of pursuing a race to the bottom for decent working people.”

In addition, Keith Hamill, who was supposed to retire from EasyJet’s board as non-executive director at the end of July, will stay on, also to help out with the recruitment process.