Tuesday, November 21, 2017

EasyJet grows on rivals’ decline, but net profit drops 30%

UK LCC easyJet has posted a sharp 30% net profit decline for the full year ended Sept. 30, dropping to €305 million ($403.5 million), although revenue and traffic were boosted by European consolidation.

Outgoing easyJet CEO Carolyn McCall described the full-year results as a robust performance during a difficult year, which saw German carrier airberlin and UK leisure airline Monarch Airlines suspend operations and Italian flag carrier Alitalia enter administration.

“What you can see is capacity shaking out even more, with the weak players becoming weaker and the strong players becoming stronger,” McCall said, speaking on the airline’s results call. “Any capacity reduction created by anybody is a benefit.”

McCall said there was no doubt that easyJet had gained from capacity coming out of the market, particularly in the case of Monarch.

Irish LCC Ryanair also canceled thousands of flights because of a crewing error, but the positive impact of Ryanair’s difficulties was minimal because Ryanair and easyJet only overlap on 8% of their networks. “From what you read in the newspapers, you’d think we were head-to-head everywhere; we’re not,” McCall said.

During the 12 month-period, easyJet carried a record 80.2 million passengers, up 9.7% year-on-year. Paired with 8.5% capacity growth, this pushed easyJet’s average load factor up by a point to a high of 92.6%.

Revenue rose 8.1% at £5.04 billion, fueled in part by 17.8% growth in ancillaries, but revenue per seat dipped 0.4% to £58.23—or 4.5% at constant currency—because of excess capacity and fierce competition.

The strong traffic and revenue performance was marred by a £101 million currency hit, pushing pre-tax profit down 17.3% to £408 million and net profit down 30.2% to €305 million.

Total costs increased by £500 million to £4.7 billion and cost-per-seat ex-fuel increased 7.7% to £41.27, or 0.9% at constant currency.

EasyJet has set up an Austrian air operator’s certificate (AOC) as a Brexit contingency plan, because 30% of its flying is within EU member states. McCall said 12 aircraft have already been transitioned to Vienna-headquartered easyJet Europe and, over the next 18 months, easyJet plans to move a total of 100 aircraft across. Setting up the AOC cost easyJet £2 million in the 2016-17 financial year and is expected to total up to £10 million over three years.

The LCC is also acquiring some of the assets of German leisure carrier airberlin and is still in the running for Italian network airline Alitalia.

“We now have a huge amount of positive momentum to allow the airline to grow its profit,” McCall said. “We have a unique combination that no other airline can match.”

Amid all this activity, McCall will step down on Nov. 30, handing over to Johan Lundgren, who was previously TUI Group deputy CEO.

When asked whether it was a bad time to leave, McCall replied: “This is probably the easiest we’ve had it in a long time. We chose to do airberlin and we have massively reduced the risks of Brexit—all we need now is a bilateral between the UK and Europe. A lot of things a CEO has to deal with are external. Because we’ve taken control, there are plates spinning, but they’re manageable plates. You have to leave when things are on the up and easyJet very much on the up. It’s the best time to leave the company; it’s in good hands.”

EasyJet plans to grow capacity by around 6% for the 2018 financial year, excluding the airberlin transaction.

Revenue trends are positive, because of market consolidation, and easyJet is now anticipating low- to mid-single digit revenue per seat growth at constant currency in the first quarter and first half.

In 2018, easyJet expects to cut its cost-per-seat by around 2%, excluding the impact of airberlin costs, although the figure will rise by up to 1% ex-fuel and at constant currency.

EasyJet operated 279 Airbus A320 family aircraft as of Sept. 30. The LCC has a further 143 aircraft on order, with 36 scheduled to arrive in 2018, 21 in 2019, 23 in 2020, 35 in 2021 and 28 in 2022.

(Victoria Moores - ATWOnline News)

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