EasyJet Plans Overhaul as Brexit Currency Losses to Doubleby
CEO McCall orders ‘organizational review’ of discount carrier
Pretax profit fell 28 percent last year, U.K. company confirms
EasyJet Plc said it’s working to streamline operations after predicting that the slump in the pound following Britain’s decision to quit the European Union will weigh more on earnings next year.
Chief Executive Officer Carolyn McCall has ordered a review aimed at producing a “simpler, more efficient organization” together with “meaningful” savings, the Luton, England-based company said in a statement Tuesday. The discount carrier will still add jobs and increase capacity.
Exchange-rate movements will cost EasyJet almost 180 million pounds ($225 million) in the 12 months through Sept. 30, 2017, it said. That’s up from 88 million pounds in the year just ended, when pretax profit plunged 28 percent to 495 million pounds, in line with guidance issued by McCall on Oct. 6.
The June 23 Brexit vote extended a slide in the pound that has inflated EasyJet’s euro- and dollar-denominated costs and which may discourage Britons from traveling abroad. At the same time terror attacks from France to Turkey have hurt demand and fares amid a capacity glut encouraged by the lower oil price.
EasyJet cut its 12-month dividend payout by 2.5 percent to 53.8 pence as a result of the profit decline, and didn’t provide an estimate for fiscal 2017 earnings. While the company will book unspecified charges for the restructuring plan, details of which have yet to be disclosed, it said the measures should begin to bring down costs six to nine months after being implemented.
McCall said the revamp will aim to stop EasyJet becoming over-complex and won’t interfere with growth plans. The carrier will boost capacity 9 percent and recruit 900 more staff in fiscal 2017, she said, adding: “In a tougher operating environment strong airlines like EasyJet will get stronger, and we will build on our already well-established network.”
Half of the new capacity will serve the U.K. as rivals including Ryanair Holdings Plc and Wizz Air Holdings Plc slow growth there following the Brexit vote, creating an opportunity, the CEO said. Smaller U.K. airlines may also struggle over the next two years, she said.
EasyJet is also close to selecting the EU nation in which it will seek an air operating certificate in order to maintain free access to flights within the bloc should the U.K.’s Brexit negotiations fail to do so. A recommendation will be made to the board in “coming weeks,” McCall said.
The airline has also agreed the sale and leaseback of 10 Airbus Group SE A319s, a deal which will give it greater flexibility to offload the planes when required than if it still owned them. It will also make a decision on buying Airbus’s largest A321neo model in the next few months, the CEO said.
EasyJet shares traded 2.9 percent higher at 1,062 pence as of 11:15 a.m. in London, paring their decline this year to 39 percent and valuing the company at 4.2 billion pounds. The stock gained 3 percent on Nov. 3 after judges said a parliamentary vote must be held before Britain starts the countdown to exiting the EU. The government is appeal the ruling.