EasyJet Drops Most in 12 Years as Brexit Vote to Depress Travelby
Low-cost carrier’s stock slumps 24% following 14% drop Friday
IAG tumbles again; Ryanair, Flybe and Wizz also suffering
EasyJet Plc fell the most in 12 years Monday after warning that the U.K. vote to quit the European Union will hurt earnings for the rest of the summer as demand for travel wanes, taking the slump in its market value since Thursday’s referendum to 2.1 billion pounds ($3.2 billion).
Shares of Luton, England-based EasyJet fell as much as 24 percent and were priced 23 percent lower at 1,002 pence as of 2:31 p.m. in London. Europe’s second-biggest discount carrier closed down 14 percent Friday in the wake of the poll result.
The historic decision to quit the EU is likely to cause “economic and consumer uncertainty,” with revenue per seat set to drop by “at least a mid-single digit percentage” in the second half ending Sept. 30 compared with a year earlier, EasyJet said in a statement Monday.
A slide in the pound’s value against the dollar, euro and Swiss franc in the run up to the vote and its plunge Friday will also raise expenses by about 25 million pounds for the year, EasyJet said, announcing plans to accelerate existing cost-cutting plans. Sterling suffered a further 3.6 percent drop Monday against the U.S. currency to its weakest since 1985.
IAG Extends Slide
EasyJet’s comments come after IAG said Friday that gains in full-year operating profit will fall short of the 70 percent surge posted in 2015 as the Brexit vote extends a slide in demand that began in the run up to the poll. Earnings growth should still be “significant,” it said.
IAG shares declined as much as 13 percent Monday after a 23 percent collapse Friday, with 3.7 billion pounds wiped from its market value over the two days. The group’s BA unit is most exposed to any impact that an EU could exit has on London’s standing as a business center.
Ryanair Holdings Plc, which while based in Dublin counts Britain as its biggest market, and U.K. regional carrier Flybe Group Plc, both of which have yet to update investors, fell as much as 12 percent and 19 percent respectively.
Among continental carriers, Air France-KLM Group, Europe’s biggest airline by passenger traffic, traded as much as 6.5 percent lower and Deutsche Lufthansa AG, the No. 3, slipped as much as 8.3 percent.
East European discount specialist Wizz Air Holdings Plc, which gets one fifth of its sales from the U.K., partly from migrant workers who may be denied access to Britain once the EU exit is implemented, lost 10 percent after plunging 22 percent on Friday. And shares of Norwegian Air Shuttle ASA, which is building a major hub at London Gatwick airport, fell a further 13 percent following a 9 percent drop when the result was announced.
U.S. carriers also extended declines, with United Continental Holdings Inc. falling as much as 7.4 percent, taking the two-day slide to 16 percent. Delta Air Lines Inc., which owns 49 percent of U.K.-based Virgin Atlantic Airways Ltd., and American Airlines Group Inc., a close ally of IAG, have declined 14 and 16 percent respectively over the same period.
EasyJet also said that French air traffic control strikes and adverse weather weighed on sales in the third quarter, which ends Thursday, as seats had to be reallocated to passengers from more than 700 flights cancelled in June alone. Those berths weren’t then available for lucrative last-minute bookings.
Pretax profit will probably be cut by 28 million pounds for the quarter, with revenue per seat dropping 8.6 percent, EasyJet said. That compares with a slide of about 7 percent that the carrier indicated at its half-year results.