EasyJet Sees 2013 Profit Gain as First-Half Loss Narrows

EasyJet Plc (EZJ), Europe’s second-largest discount carrier, said it will deliver improved returns and profitability in the full year after a drive to secure more business travelers helped pare fiscal first-half losses.

Revenue per seat for the second half to Sept. 30 is likely to gain 4 percent, Luton, England-based EasyJet said today. The pretax loss for the six months ended March 31 was 61 million pounds ($93 million), versus 112 million pounds a year earlier.

EasyJet is ramping up efforts to draw corporate passengers using allocated seating, flexible tickets and higher frequencies on routes linking business centers. The carrier lured 10 million such travelers in 2012 and plans to begin fast-tracking flexi-fare customers through security at 27 airports starting this month. The first-half result was lifted by holiday traffic to beach destinations in Spain and skiing hubs such as Geneva.

“Business travelers want frequent, punctual flights to leading airports,” Chief Executive Officer Carolyn McCall said in a statement. “We want to give them other services that they truly value and which we can deliver without changing our simple efficient operations.”

Shares of EasyJet rose as much as 7.1 percent and traded 5.6 percent higher at 1,193 pence as of 10:52 a.m. in London. The stock has gained almost 56 percent this year following a 79 percent advance in 2012 that helped propel it into the benchmark FTSE 100 Index, valuing the company at 4.73 billion pounds.

Higher Occupancy

EasyJet boosted its load factor, a measure of occupancy levels, to 88.6 percent in the first half even as it increased capacity 3.3 percent to 30 million seats. About 50 percent of available berths have already been sold for the summer period.

McCall has sought to multiply frequencies on services attractive to business clients while adding routes from London to Moscow and between Milan and Rome Fiumicino airport. Higher airport charges, especially in Spain and Italy, will lift costs per seat about 4 percent in the second half, the carrier said.

EasyJet outlined plans to offer people with flexible fares priced from 79 pounds each way the option of using fast-track security lanes at airports including London Gatwick and Milan Linate. Flexi perks already include speedy boarding and a seat at the front of the plane, on top of the right to switch flights as little as two hours before the scheduled departure time.

Fleet Expansion

“Simplicity and complexity is something we talk about all the time,” McCall said on a conference call with journalists, when asked if the range of services could frustrate passengers. “From a customer point of view, they’re not confused,” she said.

EasyJet, which operates 211 Airbus SAS A320s and A319s, said it’s in the final stages of evaluating new jets needed to grow the fleet beyond 2017, while also considering options for the 2015-2017 “bridging period.” McCall said in March she’s considering the re-engined A320neo and Boeing Co. 737 Max.

“We want to get the right terms and the right price,” McCall said today. “This year is the year where we will know either way whether we’re making a recommendation or not.”

Ryanair Holdings Plc (RYA), Europe’s No. 1 discount carrier, last month ordered 175 Boeing 737-800s and said it’s mulling a follow-on deal to take the fleet above 500 jets.

‘Vanity Exercise’

“Ryanair has demonstrated operators can negotiate successfully without committing to large future growth,” Peter Hyde, an analyst at Liberum Capital in London, said in a note to investors, adding that an EasyJet plane order is likely to confirm growth of about 5 percent over the medium term.

EasyJet founder and No. 1 shareholder Stelios Haji-Ioannou has been a vocal opponent of fleet expansion.

“The results today were the outcome of buying only two new planes in the last 6 months while selling six,” Stelios, who prefers to be known by his first name, said in an e-mailed statement. “All this good work could be undone by the vanity exercise of buying new aircraft.”

Air Berlin Plc (AB1), Europe’s third largest discount carrier, posted a first-quarter loss before interest and tax that widened to 188.4 million euros ($243 million) from 149.3 million euros a year earlier. That’s after its sales fell 2.6 percent following an 11 percent capacity cut aimed at reviving earnings.

Dublin-based Ryanair will report full-year results May 20.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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