EasyJet cuts losses, shares drop on expectations of second-quarter weakness

By Joanna Plucinska and Yadarisa Shabong

(Reuters) -EasyJet's shares dropped to their lowest level since October on Wednesday as the company flagged weaker revenue expectations for the second quarter, but the airline cut losses in the first quarter and kept its profit guidance for the year.

European airlines are hoping that stable fuel prices and demand will help their performance this year after spiralling costs and geopolitical turmoil weighed on their performance in 2024. European airline shares are broadly down on the year.

EasyJet, the first UK airline to report results, produced a smaller first-quarter operating loss on easing fuel costs and strong passenger demand for travel and its holiday packages.

It made a loss of 40 million pounds ($49.27 million) for the three months to Dec. 31 versus a loss of 117 million a year earlier.

"Looking to this summer, we have seen continuing demand for easyJet's flights and holidays where we have one million more customers already booked, with firm favourites like Palma, Faro and Alicante," new CEO Kenton Jarvis said in a statement.

The airline's shares were down around 3% at 0856 GMT, responding to concerns about weaker Q2 revenues tied to increased capacity on longer leisure routes and the Easter rush falling in Q3 instead of Q2, though the summer outlook remained positive.

An adjustment for the timing of Easter, which is set for the end of April this year, could help figures for the remainder of the year, analysts said.

"While there will be a small mix shift between H1 and H2, our FY25 forecast remains broadly unchanged and easyJet remains well on track to deliver against its medium-term target of £1bn of PBT," said Dudley Shanley, an analyst for Goodbody.

The first quarter is usually the weakest for airlines as fewer customers travel between January and March.

The carrier said current booking trends were supportive of it meeting the 709 million pound pretax profit forecast for the current financial year by analysts in a company-compiled consensus.

The airline also confirmed it remained on track to meet its medium-term target of one billion pounds in pretax profit.

Jarvis, who was the airline's finance chief, took over the top role from Johan Lundgren earlier this month with a promise of continuity on executing easyJet's mid-term growth plan.

Jarvis said easyJet was set to receive all nine expected new Airbus aircraft, which will allow for capacity growth.

Many other airlines are facing aircraft delivery delays.

New CFO Jan De Raeymaeker also joined easyJet this week from rail freight firm Lineas.

Its holiday business, which has helped bolster its profits in the past few years, is set for 25% growth.

Stability in the Middle East, including a ceasefire deal between Israel and Hamas, could offer a further respite, allowing carriers to relaunch cancelled routes.

EasyJet plans to resume limited flights to Tel Aviv in June and to expand services later on, it said this week.

($1 = 0.8118 pounds)

(Editing by Rashmi Aich, Jason Neely and Jane Merriman)