24th Jan 2024 10:18
(Alliance News) - easyJet PLC "still has positive momentum", despite suffering a GBP40 million hit from the Hamas-Israel conflict, according to analysts on Wednesday, after budget airline reduced its loss in the first three months of the financial year ending September 30.
London Luton Airport-based easyJet recorded a loss before tax of GBP126 million between October and December last year, narrowed from GBP133 million during the same period in 2022.
Revenue jumped 22% to GBP1.80 billion in the first quarter of financial 2024 from GBP1.47 billion a year ago, as passenger numbers increased by 14% year-on-year to 19.8 million from 17.5 million.
Load factor was down one percentage point compared to the previous year, at 86%. easyJet flew 23.0 million seats, compared to 20.2 million in the corresponding quarter a year ago.
"easyJet's results have taken a hit from the conflict in the Middle East, but the airline still has a lot of positive momentum behind it. Losses have narrowed slightly on last year and were expected, given the seasonality of its business. Costs are slightly up, largely because of the rising price of fuel, but revenue per seat continues to improve and easyJet's holidays business is contributing more to the bottom line," said RBC Brewin Dolphin analyst John Moore.
Looking ahead, easyJet said it expects to suffer a "direct impact of GBP40 million" in the six months to the end of March due to the war between Israel and Hamas. However, easyJet eyes a strong summer period, as the number of seats sold and yield is already ahead year-on-year.
Additionally, its Holidays arm still expects over 35% of customer growth for the full year, easyJet said.
"Geopolitical conflict can spook many industries, especially airlines. Broader softness was seen at the outbreak of the Middle East conflict in October, and easyJet is counting the lost pennies from paused flights...Shutting down routes is a very expensive undertaking and it's unclear when things will normalise," said Hargreaves Lansdown analyst Sophie Lund-Yates.
"Looking further into the year, summer bookings look robust, in a sign that travel remains a priority for consumers. There is some uncertainty about how long these trends can hold though...Investors will be more concerned about the group's ability to maintain the newly reinstated dividend. At this stage it seems unlikely easyJet will scrap its plans to increase the payout to 20% of post-tax profits this year, but that will depend on the resilience of forward bookings."
AJ Bell analyst Russ Mould agreed that investors will be "watching closely to see if easyJet can stick to its plans with freshly restored dividend payments".
"This will be a key indicator of the company's confidence in the outlook. Any escalation in Middle Eastern tensions could feed into higher fuel prices, creating a renewed headwind for the group," said Mould.
Brent oil was trading at USD79.79 a barrel on Wednesday morning, down from around USD96.00 at the start of October.
Davy rates easyJet at 'outperform', setting a target price of 750 pence per share, while Peel Hunt reiterated its 'buy' rating, setting a target price of 740p. Shares in easyJet were up 4.1% to 529.20p each in London on Wednesday morning.
By Greg Rosenvinge, Alliance News senior reporter
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