Brexit and terror hit peak season earnings at EasyJet
Airline forced into unprecedented summer promotions as revenue per seat drops 7.5%
British airline easyJet said it could not predict the outcome for the end of the year after growing security concerns, weaker consumer confidence and currency volatility hit the group during its most profitable peak summer period.
EasyJet warned that depressed ticket prices are continuing through the key summer vacation season as the British budget airline faces the fallout from terrorist attacks, an attempted coup in Turkey and the UK’s decision to exit the European Union.
Rather than a hoped-for revival, revenue per seat is down about 7.5 per cent so far in the three months through September, with about 35 per cent of bookings still to come, the company said Thursday in a statement. That follows an 8.3 per cent slide in yields, a measure of fares, in the fiscal third quarter.
Uncertain demand and soft fares prompted EasyJet to back away from providing a full-year earnings forecast after saying in May that pretax profit would be in line with a company-compiled analyst consensus of £721 million. The airline then warned in the days following the Brexit vote that profit would be worse than expected for the rest of its fiscal year.
Chief executive Carolyn McCall declined to provide a fresh earnings projection on Thursday amid unprecedented volatility.
“We’ve never, ever, in a summer had to promote seats in June and July and we have done so this year,” Ms McCall said on a call with reporters.
EasyJet has faced the full brunt of events affecting the airline industry. Its reliance on mainly short-haul leisure travel makes it more vulnerable than peers to demand shocks.
EasyJet is also contending with a plunge in the pound resulting from Britain’s referendum last month on exiting the EU that’s weighing on UK travel demand and raising costs. Brexit also threatens EasyJet’s rights to fly freely to and from mainland Europe.
Disruptions, including attacks in Brussels and Paris and the crash of an EgyptAir flight that deterred travel, air-traffic halts due to strikes and poor weather, have contributed to a £125 million hit to pretax profit in the year to date, Ms McCall said on a call.
The pound’s drop will contribute another £80 million burden to earnings in the full year, – Bloomberg