EasyJet Sees Summer Recovery After Terrorist Attacks Prompt Lossby
Discount specialist says fares should revive in peak season
U.K. carrier lifts dividend, backs consensus earnings outlook
EasyJet Plc predicted that European demand for air travel will rebound from the spate of terror attacks that pushed it to a first-half loss, boosting dividends 25 percent and saying its cash position is strong.
Fares that are under pressure from overcapacity after the outrages in Brussels, Paris and Sinai should recover from July through September, the strongest quarter for European airlines, Luton, England-based EasyJet said Tuesday.
EasyJet halted Sinai flights after the downing of a Russian tourist jet in October, while November’s Paris shootings and the March 22 bombings in Brussels further weighed on sales. The carrier swung to a 24 million-pound ($35 million) pretax loss in its first half through March from a 7 million pound profit, and said third-quarter revenue per seat may decline 7 percent.
“You can’t expect those kinds of external events not to have an impact on your trading and your numbers,” Chief Executive Officer Carolyn McCall said on a conference call. “Despite all of that we are saying that we are comfortable with the current consensus.”
Summer demand for flights to Mediterranean destinations is encouraging, with an “improving trajectory” for bookings in May and June, she said.
EasyJet shares rose as much as 3.9 percent and were trading 2.2 percent higher at 1,503 pence as of 10:12 a.m. in London. That pares their decline this year to 13.7 percent, valuing the company at 5.96 billion pounds.
“The volumes are there now, what isn’t the same as last year is the pricing,” McCall said on Bloomberg TV. “We’ve seen that post- every big event that has happened. It takes a little bit of time and then people start flying again.”
A “more competitive trading environment” is set to continue for the medium term as fuel prices remain low, she said. EasyJet faces heightened competition as low-cost leader Ryanair Holdings Plc targets more major airports, as well as from an expansion of IAG SA’s Vueling discount-arm and makeovers at the no-frills units of Deutsche Lufthansa AG and Air France-KLM Group.
Lufthansa, Air France-KLM and British Airways-parent IAG have all in the past two weeks posted quarterly earnings that beat estimates, while warning of weakening fares as sales fail to keep pace with summer capacity increases. Ryanair posts earnings for the year ended March 31 on May 23.
McCall will lift investor payments to 50 percent of post-tax profit from 40 percent and said EasyJet’s fiscal 2016 pretax profit should be in line with analyst forecasts. As of May 9 that figure was 721 million pounds, according to company-compiled data, down from a Jan. 26 consensus of 738 million pounds.
The impact of terrorist attacks since October will reduce annual earnings by 80 million pounds, offset by plans to cut costs per seat excluding fuel by 1 percent by controlling airport, baggage handling and supplier expenses.