EasyJet flies lower on Q3 revenue drop, uncertain outlook

Budget airline EasyJet posted a drop in revenue per seat and total revenue for the third quarter amid difficult trading that was hit by the terror attack in Brussels and the Egyptair tragedy.

For the quarter ended 30 June, total revenue per seat was down 8.3% at constant currency or 7.7% on reported basis to £54.54, while total revenue fell by 2.6% to £1.196bn as increased seat capacity was offset by the impact on yield of overall market capacity and cancellations as a result of external events.

EasyJet said its commercial and operational performance was affected by the Brussels attack and Egyptair tragedy, air traffic control strikes and congestion, runway closures at Gatwick airport and severe weather leading to 1,221 cancellations.

Still, the company said ongoing improvements to its customer proposition and other revenue initiatives helped to stimulate bookings, making up for part of the impact of disruption and other external factors.

The load factor – which gauges how full flights are – rose to 92% from 91.7% in the third quarter of 2015.

Chief executive Carolyn McCall said: "The economic and operating environment has been difficult in the third quarter due to a number of factors including air traffic control strikes and other industrial action, runway closures at London Gatwick and severe weather. These factors combined with industry capacity growth in short haul continue to have an impact on industry yields at a peak time of year. More recently currency volatility as a result of the UK's referendum decision to leave the EU as well as the recent events in Turkey and Nice continue to impact consumer confidence.

“Despite this, EasyJet carried more passengers and achieved higher load factors during the third quarter as EasyJet's brand continued to resonate strongly across Europe. EasyJet is strongly controlling costs and driving continued improvement in operational and customer delivery. We are focussed on the opportunities that are inevitable from a tougher environment.”

The company said the economic and operating environment remains uncertain following the UK referendum and recent events in Nice and Turkey, which have hit consumer confidence.

Numis said it was “appropriate to take a cautious attitude to Q4 revenue development”, adding that it has cut its full-year 2016 pre-tax profit forecast to £495m from £612m.

The brokerage, which rates the stock at ‘hold’, also cut its target price to 1,200p from 1,400p.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The industry has been increasing capacity for some time and that is starting to have an effect on pricing, squeezing revenue per seat. Until now EasyJet has been coping well, with rising passenger numbers offsetting lower revenues per seat. Capacity growth is continuing but the scale of yield declines is nonetheless starting to hit revenues.

“That trend is being exacerbated by an increasingly hostile operating environment, as economic and security concerns dent consumer confidence, with terrorist attacks and industrial strikes taking their toll.”

At 1532 BST, EasyJet shares were down 5.3% to 1,068p.