EasyJet weathers low fares price war with 'sound' results

EasyJet said yesterday that the winter fare war among low-cost carriers had been much less damaging than forecast.

The UK airline, which is vying with Ryanair for leadership of the European low-cost carrier sector, said its yield or average fares had fallen by only 2 per cent in its first quarter to December to £39.04.

Last week Ryanair chief executive Mr Michael O'Leary was forced to retreat from his dire warnings last year of a bloodbath this winter in the short-haul airline market, as the Irish carrier announced much better than expected results for the three months to December 31st.

It said its yields had risen by 1 per cent in the quarter, and it forecast a rise of 5 per cent in its current fourth quarter to March 31st.

Ryanair warned last year of a steep fall of 10-20 per cent in average fares this winter, a forecast it modified last November to a drop of 5-10 per cent.

Ray Webster, EasyJet chief executive, said yesterday that the airline had a "sound" first quarter. The second quarter to March was also performing "positively", helped by the earlier timing of the Easter holiday in March.

He said the airline's "visibility" on forward bookings remained limited, however, and that yield assumptions in the group's longer-term business plan were based "on an outlook for continued intense competition".

Mr Chris Avery, aviation analyst at JPMorgan, said: "We think that pressure may be building up for a positive earnings surprise."

EasyJet's shares fell 1.8 per cent to 227¾p after a sustained four-month rally which has seen the price recover from a low last September of 118¼p to a close last Friday of 232p.

EasyJet said it had improved its ancillary revenues per passenger by 21 per cent in the quarter, and as a result its total revenues per passenger had declined by only 0.8 per cent to £41.87.

Ancillary earnings, which include internet commission from areas such as car rental, hotels and insurance bookings, have become important as new sources of revenue.

EasyJet said that it had made gains from the addition of a new hotel partner, improved in-flight sales and a more rigorous application of its excess baggage policy. It carried 26 per cent more passengers in the three months, at 6.7 million, and raised the share of available seats it filled from 82.4 to 83 per cent.- (Financial Times service)