EasyJet Shrugs Off Brexit Concern as Summer Bookings Gain

(Bloomberg) -- EasyJet Plc delivered a surprisingly upbeat assessment of the impact of Brexit on the European travel market, saying that not only will flights continue unimpeded but that bookings for next year are actually higher.

The company’s fiscal first half, which ends on March 31, two days after Britain is due to quit the European Union, is showing “solid demand,” with 50 percent of seats already sold, while bookings for the peak summer season are slightly ahead of last year, Luton, England-based EasyJet said on Tuesday.

Key Insights

EasyJet Shrugs Off Brexit Concern as Summer Bookings Gain

  • Chief Executive Officer Johan Lundgren told Bloomberg TV that though he’d like to see more “certainty and clarity” over Brexit, there’s no evidence that Brits plan to travel less, even after a reduction in their spending power following a slump in the pound.
  • There’s little risk of disruption to flights, with both the U.K. and European Union having announced measures to maintain services in the event of a no-deal split, he said, adding that EasyJet has prepared for “every possible scenario.”
  • The CEO revealed that EasyJet has amped up its currency hedging as the pound is roiled by uncertainty over Prime Minister Theresa May’s Brexit deal. That may calm investors after the stock fell 6.6 percent Thursday as U.K. ministers sought to derail the deal, sending sterling plunging.
  • EasyJet is close to achieving majority ownership by nationals of the European Economic Area, excluding the U.K. That’s important because such a majority will be required for it to carry on operating flights within the EU after Brexit. The company has already opened a European HQ in Vienna, allowing it to obtain an EU operating licence.

Market Reaction

  • Shares of EasyJet traded 3.2 percent lower as of 10:30 a.m. in London after it warned that higher oil prices will weigh on margins. The stock has declined 22 percent this year, slightly better than par for the six-member Bloomberg EMEA Airlines Index, which is down 26 percent,
  • The outlook for fiscal 2019 “continues to look challenging with increasing fuel headwinds, flat ex-fuel unit costs and pressure on first-half yields,” Bernstein analyst Daniel Roeska wrote in a note.

Read More

  • Fiscal 2018 pretax profit rose 41 percent to 578 million pounds ($742 million). Revenue per seat is set to fall this year at constant currencies. To see the company’s earnings statement click here.
  • EasyJet’s bid for Alitalia SpA is focused on the Italian carrier’s short-haul network, but a deal must make commercial sense and be within the U.K. company’s operational capabilities, Lundgren said. He added that EasyJet currently has no interest in Flybe Group Plc, which is in takeover talks.
  • EasyJet has secured Dubai giant Emirates as its latest partner for flight transfers, which will initially focus on London Gatwick airport. That follows deals with Virgin Atlantic Airways Ltd., Norwegian Air Shuttle ASA, Singapore Airlines Ltd. and Canada’s WestJet Airlines Ltd.

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