26th Jul 2022 16:00
(Alliance News) - easyJet PLC's third quarter outturn was marred by airport disruption, which analysts expect to plague the aviation sector for the near future.
However, with capacity edging closer to pre-virus levels, there are some reasons for the budget carrier to be cheerful.
Revenue was just a touch below pre-pandemic numbers in the three months that ended June 30, multiplying to just under GBP1.76 billion from GBP213 million a year ago. In the third quarter of financial 2019, revenue was a hair above GBP1.76 billion.
easyJet recorded a GBP114 million headline pretax loss, narrowing from GBP318 million a year earlier. The bottom line was hurt by GBP133 million in costs stemming from disruption.
Swiss bank UBS said the third quarter update was encouraging.
"The update should prove reassuring in respect of summer," UBS said.
easyJet shares were 0.4% higher at 375.30 pence each in London on Tuesday afternoon.
Analysts at Liberum, meanwhile, said ongoing disruption overshadowed the quarterly outturn.
"easyJet's Q3 update provided clear evidence of a firmly-established recovery in air travel demand. Passenger volumes, load factors and unit revenues all showed clear improvements. Well-publicised operational disruption has had a material impact, resulting in a loss in the seasonally second strongest quarter," the broker explained.
easyJet flew 22 million passengers in the quarter, seven-times higher annually, with capacity at 875 of pre-virus levels.
It added: "The unprecedented ramp up across the aviation industry, coupled with a tight labour market, has resulted in widespread operational challenges culminating in higher levels of cancellations than normal. Despite this, easyJet operated 95% of its planned schedule in Q3."
It was the 5% of its schedule it failed to fulfil which has grabbed the headlines recently, however.
AJ Bell analyst Russ Mould commented: "This is damaging to easyJet's image and could undermine a recovery in demand from holidaymakers keen to jet off for some summer sun."
"The company notes an improvement in July and says things have ‘normalised’ but presumably they and other relevant players like the airport operators thought they were all set earlier in the year and that proved not to be the case.
"Problems like shortage of labour aren't going to disappear overnight. For now though it does look like people have been so starved of their week on the beach they’re prepared to put up with some disruption and higher costs. How long that can last when household budgets are under severe pressure is open to question. Maybe you can stick a summer break on the credit card this year and worry about paying it off when you're back. However, that's not sustainable beyond the short term."
easyJet said conditions in July improved because it took steps to remove capacity due to caps imposed by London Gatwick and Amsterdam Schiphol airports.
Edison analyst Richard Finch commented: "Senior management, however, remains optimistic. During the last quarter EasyJet flew more than seven times more passengers than it did during the same period last year. Looking ahead to Q4, on capacity expected to be 90% of Q419, bookings remain solid with Q4 71% booked and sold ticket yield up 13% on last year.
"Yet, two significant challenges face the airline. The first, and most pervasive, will be the rising cost-of-living crisis which may ultimately force families to reconsider travelling abroad. Whilst this trading update does suggest that the group has reason to be optimistic about the coming school holidays, with a strong pipeline of bookings for Q4, the predicted rise in energy bills over the autumn may force many to reconsider going on holiday this winter."
A second challenge for easyJet is shaking off any reputational damage from disruption, Finch added.
"Many frequent flyers with the airline may be hesitant to book knowing that their flight could be potentially rescheduled or cancelled, and may instead choose another airline to fly with. With Heathrow airport recently calling on airlines to stop selling summer tickets, and no quick solution in sight for the airlines, this staff shortage could plague easyJet's operations for the foreseeable future."
By Eric Cunha; [email protected]
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