EasyJet Predicts Wider First-Half Loss as Easter Trims Sales

Jan 23, 2014 4:13 am ET

(Updates stock reaction in fifth paragraph.)

Jan. 23 (Bloomberg) -- EasyJet Plc, Europe’s second-biggest discount airline, predicted a wider first-half loss as the timing of the Easter holiday trims sales and competition in the low-cost industry intensifies.

The first-half 2014 pretax loss will be 70 million pounds ($116 million) to 90 million pounds, compared with a loss of 61 million pounds a year earlier, EasyJet said in a statement today. Revenue climbed 7.7 percent to 897 million pounds in the three months through December.

EasyJet is intensifying efforts to win business passengers as well as older, more affluent customers with allocated seats, flexible tickets, fast-tracking and higher frequencies to key destinations. The company, which rolled out allocated seating in 2012, predicted fiercer competition in November as discount rivals including Ryanair Holdings Plc, Norwegian Air Shuttle AS and Spain’s Vueling chase market share.

“We have delivered revenue per seat growth in the quarter against a challenging competitive environment and the tough comparison with the prior year,” Chief Executive Officer Carolyn McCall said in the statement.

Easyjet fell as much as 63 pence, or 3.6 percent, to 1,680 pence in London trading. The stock doubled in value last year and has gained 12 percent so far in 2014.

Easter Timing

The timing of the 2013 Easter holiday boosted sales by 25 million pounds in the first half of last year, which will not be the case this year, EasyJet said, adding that bookings for the six month period through March are line with a year earlier.

The second-half may also prove to be challenging with rivals ramping up capacity, RBC Capital Markets analyst Damian Brewer said in a note to investors today

“Summer 2014 looks set to see more head-to head low-cost carrier on low-cost carrier spats - at Milan, Brussels, Rome, Athens,” Brewer said. Air France-KLM’s Transavia unit may also be growing, he said.

Revenue per seat climbed 3.4 percent to 55.71 pounds, with EasyJet boosting the number of business travelers flown in the quarter by 8.9 percent, ahead of overall passenger growth of 4.2 percent. Sales benefited from a 3 percent jump in average sector length with EasyJet ramping up flights to cities like Tel Aviv and Moscow.

Capacity Growth

Under McCall, Luton, England-based EasyJet has added routes including London-Moscow and Milan Linate to Rome Fiumicino. The carrier will offer flights from the U.K. capital to Brussels and Strasbourg starting in March using slots recently acquired from Flybe Group Plc. A new base in Naples will be operational starting in the spring, EasyJet said today.

European short-haul capacity grew by 2 percent in the quarter and 0.5 percent on EasyJet routes. The airline said it aims to grow capacity 5 percent in fiscal year 2014 and is seeking to refine its destinations by dropping under-performing routes including connections between Madrid and Bilbao in Spain.

Maintenance expenses and higher airport charges drove the airline’s cost per seat excluding fuel up by 3 percent in the quarter. The airline estimated that its full-year fuel bill will increase by as much as 40 million pounds, while the exchange rate movements will be flat.

The total passenger count increased 4.2 percent to 14.3 million in the quarter, boosting EasyJet’s load factor, a measure of occupancy, to 88.7 percent.

Larger European rival Ryanair reports third-quarter results on Feb. 3.

--Editors: Benedikt Kammel, Robert Valpuesta