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EasyJet says smaller H1 loss shows it can cope with turbulence

Tuesday, 13 May 2014 - 2:14pm IST | Agency: Reuters

British low-cost airline easyJet said a smaller-than-expected first-half loss, helped by tight cost control and more business passengers, showed it could cope with growing competition and any disruption to bookings from this summer's soccer World Cup.

Shares in the group, which have risen around 50% in the past year, dropped as much as 6% in early trading, as some analysts expressed disappointment it had broken a recent trend of upgrading forecasts.

However, they mostly remained upbeat about a business which has stolen a march on larger rival Ryanair by introducing allocated seating and allowing passengers to change flights in a bid to appeal to business travellers.

"The initial share price reaction shows that the weight of expectation for easyJet is, unsurprisingly, increasing," said Hargreaves Lansdown analyst Richard Hunter.

"The shares may be subject to some shorter term profit taking, although the market consensus of the shares as a "buy" remains firmly intact."

EasyJet said it expected a 3% increase in flight capacity by competitors this summer and that the soccer World Cup, due to start in Brazil in June, meant forecasting passenger behaviour was difficult.

"The booking patterns are quite hard to read. In every single market people will watch the World Cup and then they will go away on holiday but they will wait for their team to go out," Chief Executive Carolyn McCall told reporters on a call.

Nonetheless, the group said 51% of its second-half seats were already booked and its "ruthless focus on cost" would ensure it coped well.

EasyJet posted a pretax loss of 53 million pounds ($89 million) for the six months to March 31, a 13% improvement on the same period last year, and ahead of its own guidance for a loss of between 55 million and 65 million pounds.

The group, like other airlines, traditionally runs at a loss over the winter when fewer customers fly.

Its improved performance came despite the fact that, unlike the first-half last year, it did not benefit from the Easter holiday, which fell in April this year.

However, benign winter weather meant fewer disruptions and lower de-icing costs, as it delivered 14 million pounds of annualised savings in the first half, while its number of business passengers rose 8.5%, ahead of overall passenger growth of 4%.

Ryanair, due to report its annual results later in May, has stepped up its efforts to attract business travellers, saying in March it was in talks about flying to more convenient airports, having already introduced allocated seating.

At 0820 GMT, easyJet shares were down 4.3% at 1,655 pence, the biggest fall by a European blue-chip stock, although off an earlier low of 1,626 pence.

($1 = 0.5927 British Pounds)

(Editing by Paul Sandle and Mark Potter)


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