EasyJet Narrows Loss on Business-Travel Lure, Mild Winter

EasyJet Plc (EZJ) said it will more than double capacity growth this summer even as rival carriers add seats at a faster pace and the soccer World Cup casts doubt over demand as sports fans follow the tournament on television.

Europe’s second-biggest discount airline will add 6.7 percent more seats in the six months through September compared with a year earlier, it said in a statement today after posting a lower-than-forecast loss for the first half to March 31.

Shares of EasyJet fell as much as 6 percent after the Luton, England-based company said percentage growth in revenue per seat is likely to be restricted to “low single digits” with the surge in capacity. RBC Capital Markets analyst Damian Brewer said the outlook most likely reflects caution about the impact on sales of the looming soccer competition in Brazil.

“In every single market, people will watch the World Cup and then they will go away on holiday, but they’ll wait for their team to go out,” Chief Executive Officer Carolyn McCall said on a conference call. “It just makes it a little harder to read in terms of the capacity.”

EasyJet fell as much as 104 pence to 1,626 pence, the steepest decline since Nov. 4, and was trading 4.9 percent lower at 1,646 pence as of 8:42 a.m. in London.

The stock has added 10 percent this year after doubling in price in 2013, valuing the company at 6.54 billion pounds.

Slot Purchase

McCall said EasyJet is “driving quite a lot of the capacity increase in the market,” boosting its position at Rome Fiumicino Airport about 33 percent and ramping up its presence at London Gatwick with slots bought from Flybe Group Plc.

Discount rivals such as Ryanair Holdings Plc (RYA) and Norwegian Air Shuttle AS (NAS) are also adding seats, while full-service carriers are striving to become more competitive via low-cost units including Germanwings at Deutsche Lufthansa and Barcelona-based Vueling at British Airways owner IAG SA. (IAG)

EasyJet’s planned summer growth compares with a capacity boost of 3.7 percent last year, while the 3 percent high-season expansion the carrier predicts at rival operators contrasts with a 1 percent contraction in 2013, according to Brewer.

Today’s comments are likely to see analyst estimates for full-year pretax profit beyond a median figure of 570 million pounds “drifting down” and the range tightening, he said.

‘Stealthy Progress’

EasyJet’s first half loss shrank to 53 million pounds from 61 million pounds a year earlier as the carrier lured business travelers with a range of paid-for perks and a milder winter reduced seasonal disruption. The company had said in March the loss would be between 55 million pounds and 65 million pounds.

EasyJet boosted capacity 3.6 percent to 31.1 million seats in the first six months, spanning the northern winter, when travel demand is generally subdued, with the load factor, reflecting seat occupancy, gaining 0.4 points to 89 percent.

Under McCall, EasyJet has targeted more time-sensitive and affluent passengers with a mix of flexible tickets, allocated seats, fast-track boarding and higher frequencies between major European business hubs like Milan, Rome, Geneva and London.

“We’re only scratching the surface,” McCall told Bloomberg Television, adding that the airline carried 12 million business passengers in the year through March. “This is a long steady road and we’re making very stealthy progress.”

Still, leisure travel remains the “bedrock” of EasyJet’s business model, she said. About 51 percent of available seats have been sold for the summer season, a month of which will be dominated by the World Cup staring June 12 and ending July 13.

Chief Finance Direct Chris Kennedy said that with only half of berths sold so far, second-half earnings to be impacted the trend in yields or ticket prices as more people book.

“It’s very early in terms of visibility over the summer bookings,” he said on the conference call, adding that airline earnings are sensitive even to “a very small change in yield.”

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

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

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