EasyJet Revenue per Seat Falls 7.4%

EasyJet blames Brexit for weak outlook, but when you read deeper there are also high Oil price and an over-populated marketplace behind this drop in profit

(Reuters) – British low-cost carrier easyJet warned on Monday that demand and pricing were suffering from Brexit jitters and a weaker economic outlook, sending shares in European airlines lower.

EasyJet said it was set to rack up a 275 million pounds ($359 million) loss for the first half of its financial year, in line with earlier guidance, while expecting revenue for the six months ended March to grow 7.3 percent to about 2.34 billion pounds.

However, revenue per seat at constant currency is expected to have declined by about 7.4 percent and the company said it was seeing weakness in ticket yields across Europe, in contrast to guidance last November.

“For the second half, we are seeing softness in both the UK and Europe, which we believe comes from macroeconomic uncertainty and many unanswered questions surrounding Brexit,” Easyjet Chief Executive Officer Johan Lundgren said.

Shares in the company fell 7 percent in response, making them the biggest loser on London’s blue chip index and dragging other European airlines lower. IAG, owner of British Airways, slipped 1.8 percent and Ryanair fell around 5 percent.

“The outlook is the challenge, with management having less confidence on the second half – the summer,” Liberum analyst Gerald Khoo said.

“Brexit uncertainty is the main issue, but management sees macro uncertainty beyond the UK too.”

European airlines are battling over-capacity and high fuel costs. Iceland’s WOW air was the latest budget airline casualty last Thursday, halting operations and cancelling all future flights after efforts to raise more funds failed.

Airline chiefs said last month that while carriers will be able to withstand the impact of Britain leaving the European Union, even without a deal, the lack of political progress is frustrating and has dampened consumer demand.

Britain and the EU have said that flights will continue, even in the event that there is a no-deal Brexit and Easyjet said it was sure that it would be flying as usual.

EasyJet, which is the largest operator at Britain’s second-biggest airport Gatwick, said costs were set to rise 18.8 percent, driven by fuel costs and its investment in capacity.

Original article source -Reuters


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