EasyJet predicts 14pc profit growth as low euro helps to boost traffic
Published 23/07/2015 | 02:30
British low-cost airline EasyJet has forecast annual profit growth of up to 14pc, helped by higher demand for beach holidays. The forecast calmed fears it had raised over its outlook.
It also saw shares in the airline - the second-biggest European low-cost carrier after Ryanair - recover ground lost on Tuesday when they slumped after Commerzbank advised investors to sell EasyJet's stock.
EasyJet shares were up 4.3pc in early trading, their highest level since the middle of May. Shares in Ryanair were 0.7pc higher by lunchtime yesterday. It releases first quarter results on Monday.
Revenue performance in the three months to the end of June was better than EasyJet had forecast in May, boosted by increased demand for flights to southern European resorts such as Malaga, Alicante and Faro from northern Europe, and Britain in particular.
The strength of the pound against the euro is making holidays on the continent particularly appealing for Britons this year.
The euro hit a seven-and-a-half year low against the pound last Friday, having shed around 10pc against the currency since the start of the year.
EasyJet did, however, warn that it faced a series of uncertainties in future given the crisis in Greece, a bloody attack on tourists in Tunisia, the impact of a fire at Fiumicino airport in Rome and various threats of industrial action.
Despite these uncertainties, the airline, which is headed by Carolyn McCall, forecast profit growth of between 7pc and 14pc for the year to the end of September, putting it on track to meet analyst forecasts for a 10pc rise.
"With 77pc of second half seats now booked, EasyJet expects to grow profit before tax from £581m for the year to September 30, 2014, to a range of £620m to £660m for the year to September 30, 2015," said Ms McCall.
The company's warning over revenue per seat in May had dragged on the stock. Before yesterday, EasyJet shares had fallen 9pc since the statement in mid-May compared to a 10pc rise in Ryanair's stock.
The divergent performances reflect concerns about Ryanair's move into what has traditionally been EasyJet's territory, after the Irish carrier polished up its image and started adding more main city airports to its routes.
But some analysts believe those fears are overdone.
Ryanair and EasyJet compete directly on less than 5pc of routes, and EasyJet is years ahead of Ryanair in having built a network based on so-called primary airports closer to large cities.
The EasyJet strategy would help it continue to win in what it called a "more competitive market", the company said.
Analysts said investors would be relieved by this latest update from EasyJet. "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," Numis analyst Wynn Ellis said, referring to yield, a measure of pricing per passenger.
Ryanair also battles other airlines across Europe, including IAG's Spanish carrier Vueling.
In Dublin, Ryanair is expected to respond quickly to IAG's takeover of Aer Lingus, which could be cemented next month.
It's believed Ryanair will base more aircraft at the capital this winter than already flagged as it beefs up its frequencies and presence at primary airports.
The airline expects to carry about 100m passengers in the current financial year, which ends next March. It will take delivery of over 30 new aircraft between September and March and is launching flights to Israel later this year.