22nd Jul 2015 10:06
LONDON (Alliance News) - Budget carrier easyJet PLC on Wednesday said it beat its guidance for revenue per seat in the third quarter, even as its total revenue fell for the period, and said it expects its pretax profit for the full-year to grow on the back of its strong second half performance.
While overall revenue was down, driven by a series of issues the airline faced in the quarter, Chief Executive Carolyn McCall said that, with 77% of its second-half seats now booked, the company expects to post a pretax profit of GBP620 million to GBP660 million for the year to the end of September, compared to GBP581 million a year earlier.
"Our third quarter performance means that for the full year easyJet will grow revenue, profits and dividends," McCall said.
The pretax profit guidance is in line with what easyJet said in its half-year results in May, when it swung to a profit on the back of lower fuel prices and favourable exchange rate movements and as it said it still expected profit to rise in 2015 despite the French air traffic control strike.
easyJet said the underlying performance of its business is consistent with its capacity and cost guidance issued in its half-year results in May, despite it having absorbed a further GBP15 million in disruption costs. Revenue per seat is trending ahead of expectations and the group said it expects to successfully navigate through a currently uncertain macro and operational environment.
The buoyant outlook for the full year sent shares in the carrier soaring higher throughout the morning on Wednesday. Shares in the company were up 3.8% to 1,729.58 pence mid-morning, comfortably the best performer in the FTSE 100.
The FTSE 100-listed company said its revenue per seat was down by 5.4% in the three months to the end of June to GBP59.08, slightly better than the guidance it issued in May. The better-than-expected figure was driven by good trading in the UK and on beach routes in Europe in May and June. These bright spots partly offset the impact of French air traffic controls strikes in April.
Total revenue in the quarter was down 1% to GBP1.23 billion. Capacity rose by 4.7% to 20.8 million seats, and passengers carried rose by 6.2% to 19.1 million. Its load factor increased 1.3 percentage points to 91.7%.
easyJet said its cost per seat, including fuel, fell 3.3% in the quarter on a reported basis, but rose by 2.8% in constant currencies due to the French strike, the fire at Fiumicino Airport in Rome, and increased airport charges, primarily in Italy and Germany.
Despite the cost per seat increase, easyJet expects its unit fuel bill for the second half of the year to be down by GBP65 million to GBP80 million year-on-year, while its full-year fuel bill will fall by GBP100 million to GBP115 million, both due to the lower world oil price.
easyJet said it had a tough start to the quarter due to Easter falling earlier in the year and due to the French air traffic control strike, which together took a 3 percentage point bite out of the company's revenue per seat. The disruption in April hit easyJet's pretax profit to the tune of GBP25 million and was particularly disruptive to the company due to its extended nature, the carrier's strong presence on domestic routes in France, and because two-thirds of its network flies through French airspace, higher than other carriers.
Indeed, easyJet said it experienced an increased level of disruption across its network in the quarter, with 1,463 flights cancelled, compared to 648 a year earlier. The French strike was responsible for 591 of the cancellations, with the remainder down to the fire at Fiumicino in May.
This was offset in the quarter, however, by better-than-expected overall trading outside of the strikes, including a good performance in the UK and on beach routes in Europe.
Business passenger numbers in the quarter were up in line with expectations, while its yield per seat increased by 3.4% and sales of inclusive fares rose by 76%. easyJet and arch rival Ryanair Holdings PLC have been seeking to expand their passenger pool with the introduction of business class seats, a move which has driven up demand for Ryanair and which helped its half-year profit higher.
Cantor Fitzgerald said easyJet's third-quarter trading was "strong", though it said some key near-term risks are still in play, including the possibility of around 3,500 Unite union-associated cabin crew taking strike action, though the broker said easyJet's guidance appears to include these risks.
Gerald Khoo, an analyst at Liberum, said the update was "reassuring", though he warned "challenges remain from the uncertain macro and operational environment, but we see valuation upside in absolute terms and relative to Ryanair."
Numis said easyJet's pretax profit guidance was in line with its estimates. "With all the concerns that the market has had about excess capacity in the market and the likely impact on yields, we believe that these results will be well received," said analyst Wyn Ellis.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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