EasyJet Increases Passenger Numbers, Fills More Seats (Update4)

July 7 (Bloomberg) -- EasyJet Plc, Europe's second-biggest discount airline, gained in London trading after the purchase of GB Airways Ltd. and more aircraft led to a 20 percent increase in passengers.

EasyJet flew 4.11 million travelers in June, compared with 3.44 million a year earlier, the Luton, England-based airline said today in a statement. The load factor, or proportion of seats filled, gained 0.1 percentage point to 86.9 percent. Revenue per seat ``continues to improve,'' the airline said.

The U.K. carrier and Ryanair Holdings Plc, its larger discount competitor, may be winning additional customers because people are trading down from more expensive network airlines as record fuel costs boost ticket prices. EasyJet said today that 70 percent of seats for the second half of the fiscal year ending Sept. 30 have already been sold.

Sharp passenger growth ``and load factors remaining relatively flat lend support to suggestions that passengers are beginning to trade down from higher-fare competitors,'' said Eamonn Hughes, an analyst at Goodbody Stockbrokers in Dublin.

EasyJet advanced 9.75 pence, or 4 percent, to 254.25 pence, trimming the decline this year to 59 percent. Ryanair rose 5.6 percent to 2.55 euros today in Dublin.

Ryanair Expands

EasyJet and Ryanair are the only European low-cost carriers planning to significantly extend capacity this year as record oil prices and slowing economies cause some airlines to scale back expansion plans.

The burgeoning array of offerings from the two companies show they have ``no plans to slow capacity growth over the key summer period,'' Goodbody's Hughes said.

Dublin-based Ryanair said last week it carried 19 percent more passengers in June and the load factor fell 1 percentage point to 84 percent. The Irish airline plans to use a slump among European airlines to expand and take market share from competitors.

Ryanair and EasyJet are taking delivery of new Boeing Co. and Airbus SAS aircraft, respectively. EasyJet also bought GB, a former British Airways Plc franchise, in January, to gain more routes to vacation destinations and a greater presence at London's Gatwick airport.

British Airways said last week that traffic, or the number of passengers multiplied by distance flown, dropped 3.7 percent in June as U.K. consumers put off flying. Higher fuel surcharges may also be crimping ticket sales, Group Treasurer George Stinnes has said.

`Pricing Up'

``Airlines, network carriers in particular, are pricing up,'' said Andrew Evans, an analyst at Dresdner Kleinwort in London. ``Some demand is being choked off. The network carriers have reported falling loads in recent months.''

U.K. service industries from airlines to banks reported contracting sales and business conditions last month at the highest rate since October 2001, the Chartered Institute of Purchasing and Supply said July 3. A global tightening of credit and rising food and fuel prices is causing consumers to refrain from spending.

There's ``a very high correlation between spending on air transport and overall spending,'' Stephen Furlong, an analyst at Davy Stockbrokers in Dublin, wrote in a note to investors dated June 24. ``The low-cost carriers will, however, benefit from trading down.''

Aer Lingus, Air France

Aer Lingus Group Plc, Ireland's second-biggest airline after Ryanair, said today that passenger traffic rose 12 percent in June. The load factor fell to 81.5 percent from 82.2 percent as the Dublin-based airline expanded its fleet and added new destinations. The shares gained 4.8 percent.

Network airline Air France-KLM Group, Europe's biggest, said passenger traffic rose 2.6 percent last month -- lower than some analysts and fund managers had predicted. The shares rose 4.6 percent as the Paris-based airline said it would scale back plans to increase capacity in the winter season.

Air Berlin Plc, Europe's third-biggest discount airline, posted almost unchanged passenger numbers in June as it cut capacity to make up for rising fuel costs. Spokesman Peter Hauptvogel said the airline trimmed 30,000 seats in June versus a year ago as it used smaller planes on many routes. Air Berlin dropped 4.8 percent to 4.20 euros, taking the decline this year to 66 percent.

``While demand could be very strong this summer, we would expect it to be less buoyant over the winter,'' said Furlong, who has British Airways, EasyJet, Ryanair and Aer Lingus on his ``focus list'' of companies. ``Expect large-scale cutbacks in capacity, with weaker players having to restructure, merge or disappear.''

To contact the reporter on this story: Tracy Alloway in London at talloway@bloomberg.net

To contact the editor responsible for this story: Chris Jasper at cjasper@bloomberg.net.