EasyJet issues profits warning following flight disruption

EasyJet issues profits warning following flight disruption

EasyJet has issued a profits warning, blaming a drop in pre-tax profits on an "extremely challenging" operating environment in May and June.

The budget airline said third quarter pre-tax profits would be down by as much as £28 million.
 
The vote to leave the European Union has also created economic and consumer uncertainty this summer.
 
The airline cited 1,061 flight cancellations due to ongoing strike action by French air traffic controllers, runway and congestion issues at Gatwick, severe weather and the knock-on cancellations across the network.
    
EasyJet has been forced to make 700 cancellations to date in June alone, with strikes and weather conditions accounting for most of these, including more than 300 flights cancelled in the last seven days. This compared to 487 cancellations in the same month last year, of which 420 related to a fire at Rome’s Fiumicino airport.
 
“These incidents, together with the Egyptair tragedy, resulted in some drop off in consumer demand leading to lower yield and have impacted third quarter profit before tax by approximately £28 million and have had a negative impact on third quarter revenue per seat of circa 1.6 percentage points,” the carrier said this morning.
 
“This means that revenue per seat at constant currency in the third quarter will fall by around 8.6%, compared to the c.7% decrease guided at the half year results, as disrupted passengers were allocated seats that normally would have been sold close to departure for a higher yield.
 
“Following the outcome of the EU referendum, we also anticipate that additional economic and consumer uncertainty is likely this summer and as a consequence it is expected that revenue per seat at constant currency in the second half will now be down by at least a mid-single digit percentage compared to the second half of 2015.
 
“In addition, recent movements in fuel prices and exchange rates are now expected to add around £25 million of additional cost in the year to that guided at the half year results. In response, easyJet is continuing its efforts to drive ex-fuel cost savings.
 
“EasyJet's unique network, digital leadership, cost advantage and financial strength will ensure it continues to deliver its strategy and continue to be a structural winner.”
 
A further update on current trading is due to be released with its third quarter results on July 21.

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