EasyJet Fares Rebound as Cooler Summer Spurs Late Bookings

(Bloomberg) -- EasyJet Plc said a surge in late leisure bookings is lifting ticket prices, aided by a cooler summer in the U.K. and northern Europe.

Revenue per seat, which reflects fares, is higher and sales for the three months through June rose 11% from a year ago, Luton, England-based EasyJet said in a statement Thursday. A drop in flight cancellations has cut costs and new analytics are helping it set fares at more profitable levels.

The jump in late bookings, which usually attract higher prices, will provide some relief for European carriers that have seen margins squeezed amid a glut in capacity across the region. EasyJet Chief Executive Officer Johan Lundgren cautioned that the trend is tied to the weather and a lack of distractions such as major sporting events, with overall demand still relatively weak.

“We’re pleased with the late-booking environment,” Lundgren, who surprised the market by luring a senior executive from Ryanair Holdings Plc, said on a call, while adding that it doesn’t mean Europeans are all rushing to the beach. “The weather has been a factor, and the World Cup the previous year.”

Mean U.K. temperatures in June 2018 were 1.8 degrees Celsius above the long-term average, compared with only 0.2 degrees higher last month, according to Met Office figures.

Shares of EasyJet, the first major European carrier to provide an update on summer earnings, rose as much as 4.2% and traded 3.6% higher at 1,071.5 pence as of 8:50 a.m. in London. That pares the 2019 decline to 3% and values Europe’s second-biggest discount carrier at 4.3 billion pounds ($5.4 billion).

Backup Planes

The carrier said it’s on course to meet full-year earnings estimates, predicting a pretax profit of between 400 million pounds and 440 million pounds for the year through September. That compares with an analyst consensus figure of 423 million pounds, it said.

The third-quarter passenger tally increased 8% to 26.4 million, more than the 25.6 million average estimate in a Bloomberg survey. Expenses fell as the company cut cancellations by two-thirds by optimizing scheduling and doubling the number of backup planes, reducing compensation payments.

Data-driven initiatives have allowed EasyJet to adopt more granular pricing for both seats and ancillary sales on a route-by-route basis, providing a boost of as much as 10 million pounds in the third quarter.

EasyJet has recruited Peter Bellew as chief operating officer from rival Ryanir, where he occupied a similar post. Bellew had been seen as a potential successor to Ryanair boss Michael O’Leary and disclosed his exit from the Dublin-based carrier only last week, without saying where he was going.

Lundgren described Bellew, 54, who in an earlier job ran Malaysian Airlines, as “a great leader with a proven track record.” Bernstein analyst Daniel Roeska said in a note that the Irishman is well-respected and “a good hire.”

To contact the reporter on this story: Simon Foy in London at sfoy8@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Christopher Jasper, Andrew Noël

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