EasyJet shares plunge 10pc on outlook and Ryanair assault
Shares in Ryanair rival Easyjet plummeted 10pc yesterday as the airline warned that summer bookings are flat compared to last year, and that strikes by French air traffic controllers have knocked £25m (€35m) off its profits.
Nervous investors also ditched Ryanair stock, sending shares in the airline down over 3pc in Dublin to €10.90 and in the process cutting about €545m off its market capitalisation.
The sharp fall in Easyjet shares came despite the airline posting a profit in the first half of its financial year for the first time in more than 10 years.
The share decline made it the worst performer in the FTSE-100 index yesterday. Easyjet made a pre-tax profit of £7m (€9.8m) in the six months to the end of March, compared to a £53m loss in the first half of the previous financial year.
Chief executive Carolyn McCall described it as a "record performance", which was helped by lower fuel prices and favourable foreign exchange rates.
"As we enter the important summer season forward bookings are in line with last year and as we predicted passengers are benefiting as fares fall to reflect a more competitive operating environment and lower fuel costs," she added.
The carrier said that while it had done well in the first half, April had been a "more difficult month", due to increased disruption, with over 600 cancellations. The majority of those were caused by an extended strike by French air traffic controllers.
"April's disruption is expected to adversely impact pre-tax profit by around £25m," it said.
The threat of strike action, originally scheduled in March and then delayed following the crash of the Germanwings plane in France that month, in addition to the walk-out, weighed on bookings through April, said Ms McCall.
The crash itself was also a contributing factor, though the incident's precise effect on demand is harder to calculate, she said.
"April is very much a one-off," said the chief executive. "The revenue-per-seat effect was all about disruption, it's not a permanent state of affairs."
Analyst Mark Simpson at Goodbody Stockbrokers said he expects to cut full-year forecasts for Easyjet, for 2015 and 2016. He had previously pencilled in a £670m (€936m) profit at Easyjet for the current financial year.
"Our concerns going forward remain the increased competition, especially from Ryanair on primary airports, and the poor fuel hedging position versus its low-cost carrier peer group, with particular reference to the 2016 summer season," said Mr Simpson.
Easyjet has sought to win passengers from carriers such as Air France-KLM and Lufthansa by expanding its presence at key airports such as London Gatwick.
(Additional reporting: Bloomberg)