13th Oct 2022 18:14
(Alliance News) - Budget airline easyJet PLC is doing its best with the bad hand it's been dealt, according to Hargreaves Lansdown on Thursday.
easyJet expects to report a headline pretax loss in the range of GBP170 million to GBP190 million for its financial year that ended September 30, narrowed from a pretax loss of GBP1.14 billion the year prior.
easyJet explained that the loss in the recent year includes a GBP64 million foreign exchange loss from balance sheet revaluations and incremental disruption costs of GBP75 million, mainly from operational issues experienced across the industry in its third quarter.
"A large chunk of extra costs stemmed from the industry-wide disruption experienced in the third quarter, with well-publicised flight cancellations and short staffing leading to a real drag on resources at the time easyJet needed it least," Hargreaves Lansdown's Sophie Lund-Yates commented.
easyJet itself also noted the hit from the Omicron variant, and the Russia-Ukraine conflict.
All things considered, the airline has emerged from the storm "in decent shape", Yates maintained.
"Airlines are famous for being hard to run and easy to fail. Astronomically high costs, extreme competition and exposure to highly unionised workforces are just some of the operational challenges faced by today's carriers. easyJet is doing well on the metrics within its control, including keeping net debt at a manageable level," Yates continued.
easyJet reported cash of around GBP3.6 billion, and net debt in the region of GBP700 million at year-end.
Looking ahead to the first quarter of financial year 2023, easyJet expects to fly around 20 million seats, up more than 30% year on year. It added that load factors are currently ahead of the same point in financial 2019.
Positively, in the first full year of operations, easyJet holidays - the firm's package holiday offering - generated a pretax profit in excess of GBP35 million in the recent year. In its financial year 2021 report, the company had said it saw "a clear roadmap to easyJet holidays contributing annual profit before tax in excess of GBP100 million."
However, with UK consumer confidence hitting record lows of late, easyJet may be facing yet more turbulence, through no fault of its own.
"The group's exposure to package holidays rather than just flights should keep things on a more even keel during the cost-of-living crisis, but it's unlikely to keep all the associated issues at bay. Discretionary travel is due to see demand come down to earth with a painful bump," Yates warned.
Shares in easyjet closed up 0.3% at 285.91 pence each in London on Thursday.
By Elizabeth Winter; elizabethwinter@alliancenews.com
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