EasyJet reports a solid first quarter

Eleanor Steed
By Eleanor Steed January 24, 2017 16:20

EasyJet reports a solid first quarter

easyJet states that it continues to deliver on its strategy, reporting a solid first quarter, in line with expectations. During the period, the airline capitalised on a purposeful investment in capacity across core markets to support an 8.2% increase in passengers. EasyJet said that revenue per seat was better than previously guided on broadly flat load factors, while cost control remained strong through the ongoing lean programme.

Also during the first quarter, easyJet issued a €500 million bond at 1.125% coupon supported by both Moody’s and Standard & Poor’s sector-leading ratings. easyJet entered into a sale and leaseback arrangement for 10 A319 aircraft, which took place in early December 2016 and generated $144 million in cash. Due to the age of the selected aircraft at the time of this transaction and related maintenance provision, easyJet incurred a one-off, non-cash charge of £16 million (slightly favourable to the £20m previously expected). The airline also secured increased flexibility in fleet delivery arrangements with Airbus, with a reduced 18-month notice period on aircraft deferrals

The number of passengers carried increased by 8.2% to 17.4 million, driven by a growth in capacity of 8.6% to 19.3 million seats and load factor decreasing by 0.3 percentage points to 90.0%. Total revenue in the quarter increased by 7.2% to £997 million reflecting the increase in passengers carried through the period. Revenue per seat decreased by 8.2% at constant currency or by 1.2% on a reported basis to £51.64 per seat. Non-seat revenue rose by 19%, driven by improvements to inflight product ranges and partner agreements.

EasyJet is carrying out its plan, following the UK’s referendum vote to leave the European Union, to establish an Air Operator Certificate (AOC) in another EU member state. “This will secure the flying rights of the 30% of our network that remains wholly within and between EU states, excluding the UK. This one-off cost is expected to total around £10 million over two years with up to £5 million incurred in the 2017 financial year (£400k incurred in Q1). The primary driver of the cost is the re-registering of aircraft in an EU AOC jurisdiction,” the airline stated.

Commenting, Carolyn McCall, easyJet Chief Executive said: “easyJet has delivered a solid first quarter with revenue, cost and passenger numbers in line with expectations. This is despite a tough pricing and operating environment.

“Consumer demand remains strong with passenger growth of 8.2%, revenue growth of 7.2% and headline cost per seat reduction, at constant currency, of over 2%. The weakness of Sterling and the impact of fuel combined are £35m worse than previously expected but easyJet has made good progress in reducing costs in those areas where we have more control such as engineering, maintenance, non-regulated airports and overheads.

“easyJet continues to grow with purpose in our core markets with capacity growth of up to 9% across our network.  Our focus has been to invest to deliver long term sustainable, profitable growth by strengthening our leading positions at Europe’s biggest and most popular airports.

“The underlying year-on-year revenue per seat trend continues to improve, supported by resilient demand across all our European markets. Forward bookings are ahead of last year.”

easyJet is hedged forward, on a rolling basis, between 65% and 85% of the next 12 months anticipated fuel and currency requirements and between 45% and 65% of the following 12 months anticipated requirements.

EasyJet states that the pricing and operating environment “remains tough with fuel prices remaining low and continued strong growth in European short haul capacity impacting yields across the industry”. Still the airline’s seat capacity is planned to grow in the first half year by up to 9% and by up to 9% in the full year.

Approximately 56% of expected bookings for the second quarter have now been secured, slightly ahead of the prior year, said easyJet. Revenue per seat for the first half is expected to decline by high single digits, within the range of previous guidance. This reflects Easter moving entirely into the second half of the year and some impact in the half from the Berlin attack. Adjusting for the above, the year-on-year revenue per seat decline is expected to improve in the second quarter compared to the first quarter.

Eleanor Steed
By Eleanor Steed January 24, 2017 16:20