EasyJet Says First-Half Loss to Shrink
EasyJet Says First-Half Loss to Shrink
(Bloomberg) --
EasyJet Plc, Britain’s largest low-cost airline, said its loss over the winter low season is set to shrink as the collapse of tour operator Thomas Cook Group Plc pushes more customers its way.
The stock rose the most on the FTSE-100 Index Tuesday after EasyJet said the shortfall for the six months through March is likely to be smaller than last year’s 275 million-pound ($358 million) loss. Robust demand and lower capacity levels at competitors have bolstered fares, the airline said.
The collapse of U.K. travel giant Thomas Cook last September accounted for almost a fifth of the 8.8% gain in revenue per seat in the December quarter, Chief Executive Officer Johan Lundgren said on a conference call. The former TUI AG manager founded a new EasyJet Holidays division in November.
EasyJet follows Irish rival Ryanair Holdings Plc in issuing positive guidance after a difficult year forced a clutch of operators into bankruptcy, with Thomas Cook the highest-profile casualty. The grounding of Boeing’s 737 Max will limit Ryanair’s expansion this coming summer, meaning the U.K. airline is well-placed to pick up extra demand, according to Sanford C. Bernstein.
“Capacity growth looks moderate for this environment,” said analyst Alex Irving. “With Thomas Cook, the Max and the rest, why not go faster?” Lundgren is currently targeting a 3% seating increase over the year.
Shares of Luton, England-based EasyJet advanced as much as 5.7% and were trading 4.3% higher as of 2:10 p.m. in London, the best performance on Britain’s benchmark index after stocks slumped worldwide amid concerns about the economic impact of a outbreak of coronavirus in China.
While revenue is rising, so are costs. Peter Bellew’s arrival as chief operating officer from Ryanair could serve as a catalyst for progress, according to Irving and his colleague, Daniel Roeska.
EasyJet founder Stelios Haji-Ioannou, owner of a 34% stake, said in a statement Tuesday that while he supports the airline’s capacity restraint, he plans to make a “token vote” against the re-election of Chairman John Barton at this year’s AGM to communicate his desire for a stronger focus on earnings growth. He said he wants the company to set a target of 200 pence in earnings per share by 2021. Analysts tracked by Bloomberg forecast 113 pence.
Lundgren said that three-quarters of seats for the fiscal first half have been booked -- just over 1 percentage point ahead of the same time last year.
Revenue per seat is now forecast to gain by a mid to high single digit percentage in the six months through March, after the carrier previously pointed to a low to mid single digit increase. First-quarter sales advanced 9.9% to 1.43 billion pounds as the passenger tally rose 2.8%.
Lundgren also said on the earnings call that the company is engaging with the government regarding the controversial rescue of rival airline Flybe Group Plc, deemed vital in providing transport links within the U.K.
The CEO said any reduction to the air passenger duty tax as a consequence of losses at Flybe, which was on the brink of collapse, should apply to the industry as a whole. He said it would be “unacceptable if benefits are given to one company.”
To contact the reporter on this story: Charlotte Ryan in London at cryan147@bloomberg.net
To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Christopher Jasper
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