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EasyJet warns of economic turbulence

EasyJet today warned of a “difficult and uncertain economic and operating environment” following the Brexit vote and terrorist attacks in Europe.

The budget carrier said the Brussels attacks, Egyptair crash, air traffic control strikes, runway closures at Gatwick and severe weather leading to 1,221 cancellations had hit its performance in the three months to June 30.

EasyJet calculated that it incurred disruption costs of £20 million in the quarter.

Disrupted passengers were allocated seats that normally would have been sold close to departure at a higher price.

A shift in capacity by airlines and tour operators away from the Middle East and North Africa to the western Mediterranean was leading to high hotel prices and an over-supply of capacity that is reducing yields.

Overall market capacity on beach routes is growing 14% year-on-year, easyJet estimated.

Consumer confidence had been affected due to the UK’s vote to leave the European Union, leading to a more expensive euro.

The airline is seeing a “continuing cooling of demand” across its network due to the effects of terrorism and the Egyptair tragedy.

“This has had a particular effect on the city to city network which has a higher degree of discretionary travel,” easyJet said.

Revenue in the three months dropped by 2.6% to £1.2 billion with revenue per seat down by 7.7% to £54.54.

This came despite a 5.8% increase in the number of passengers carried in the quarter to 20.2 million as capacity rose by 5.5% year-on-year to 21.9 million seats.

Chief executive Carolyn McCall said: “The economic and operating environment has been difficult in the third quarter due to a number of factors including air traffic control strikes and other industrial action, runway closures at London Gatwick and severe weather.

“These factors combined with industry capacity growth in short haul continue to have an impact on industry yields at a peak time of year.

“More recently currency volatility as a result of the UK’s referendum decision to leave the EU as well as the recent events in Turkey and Nice continue to impact consumer confidence.

“Despite this, easyJet carried more passengers and achieved higher load factors during the third quarter as easyJet’s brand continued to resonate strongly across Europe.”

She added that the airline is strongly controlling costs and “driving continued improvement in operational and customer delivery”.

“We are focussed on the opportunities that are inevitable from a tougher environment,” McCall added.

“The easyJet business model remains robust, with a strong cash position, solid balance sheet and a flexible fleet plan.

“The easyJet team is confident in its ability to navigate the period ahead and drive long term advantage.”

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