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easyJet says demand holding up in uncertain times
Global Banking & Finance Review®
Company
By Sarah Young
LONDON (Reuters) -British airline easyJet said demand for the coming months was holding up despite pressure on household budgets, but uncertainty meant it was hard to make forecasts beyond that.
For Britain’s October school holiday and the Christmas week, ticket sales exceeded pre-pandemic levels and the airline said load factors – a measure of seats filled – for winter bookings and pricing were robust.
Tickets for next summer went on sale last week and easyJet said they showed “continued demand”, going some way to allay fears the rising cost of living could stall the aviation industry’s recovery from COVID-19.
But chief executive Johan Lundgren cautioned it was still too early to call how next year would pan out, and government policies in Britain were not helping.
“Clearly there is uncertainty out there,” he told reporters on Thursday, referring to market volatility triggered by government plans for unfunded tax cuts.
“I don’t really tend to comment directly on the fiscal policies of this government, but of course, we would like to see that there’s certainty and that there’s stability and we get back to the point of view where we get the pound to become stronger.”
Despite the cost of living crisis, Lundgren said easyJet was well-positioned given its low-fares model compared to competitors like British Airways and Air France, and because of appetite for trips.
“Despite the difficulties that households have, we still know that holidays and travel are top of the list when people can prioritise what they want to do with their disposable income,” he said.
Shares in easyJet were down 1% in mid-morning trade at around 282 pence, an 11-year low. Investor worries over future travel demand due to rising inflation has sent European airline stocks plunging.
EasyJet has lost 49% of its value in the last six months, lagging rival Ryanair which is down 28%.
While easyJet has not yet surpassed its pre-pandemic capacity, Ryanair’s passenger numbers beat previous highs in September. EasyJet flew 88% of its 2019 capacity over the summer quarter and is aiming for 83% in the current period.
Ryanair was much less affected by labour shortages that plagued easyJet and the airports it uses in the April to June period. It cancelled thousands of flights before stabilising its schedule in July.
Lundgren said easyJet’s July to September quarter was one of the best in its history in terms of operational profit, but the problems and costs earlier in the year would push it to a third consecutive annual loss.
For the 12 months to the end of September, easyJet forecast it would post a headline loss before tax of 170-190 million pounds ($188-$211 million). It is due to post results on Nov. 29.
($1 = 0.9020 pounds)
(Reporting by Sarah Young; Editing by Edmund Klamann and Mark Potter)
Load factor is a measure of how efficiently an airline fills seats and generates revenue. It is calculated by dividing the number of revenue passenger kilometers by the available seat kilometers.
Operational profit refers to the profit a company makes from its core business operations, excluding any income derived from non-operational activities such as investments or sales of assets.
Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. It is often measured by the Consumer Price Index (CPI).
Competitor analysis is the process of evaluating the strengths and weaknesses of competitors within the market. It helps businesses understand their competitive landscape and identify opportunities for improvement.
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