EasyJet shrugs off turbulent conditions to lift profit guidance

Third-quarter revenues at easyJet rose 14%, despite industrial action in France, prompting the budget carrier to increase its guidance for full-year profits.

The FTSE 100 airline said that the entire industry was facing increased disruption, which was having “an impact on revenue, cost and operational performance”. The main causes were “regular and sustained air traffic control industrial action in France” and severe weather.

As a result, 2,606 easyJet flights were cancelled in the period against 317 in the same three months in 2017. Capacity increased 8.9%, to 26.2m seats, which was lower than planned.

Yet despite the turbulent conditions, total revenues improved 14% over the quarter, to £1.6bn, while passenger numbers rose 9.3% to 24.4m. EasyJet said it had been helped by a weak performance at rivals as well as the timing of public holidays in May and an 11.5% rise in ancillary revenue per seat at constant currency, as more customers paid to have allocated seating and put bags in the hold.

Second-half revenue per seat is now predicted to increase by “low to mid-single digits” - previously the carrier said they would be "slightly positive" - while full-year profits expectations are now expected to come in to between £550m and £590m. EasyJet initially said full-year profits would be between £530m and £580m.

Chief executive Johan Lundgren said: “EasyJet has delivered a strong performance during our third-quarter, driven by robust customer demand. The airline continues to go from strength to strength, attracting more than 24m customers in the period.

“With EasyJet on track for a positive summer trading period during the fourth quarter, we are raising our guidance for full-year headline profit before tax.”

Easyjet shares rose almost 2% to 1,682.6p on Wednesday morning, having sunk to a two-month low last week.

Analysts at UBS said that Q3 revenues were up twice the rate they had expected, though cost per seat at constant currency up 3.1% versus its forecast for no change, while cost per seat excluding fuel was at 4% around double its expectations.

George Salmon, analyst at Hargreaves Lansdown, said: “Reduced competition is a clear positive, but trends in the wider market are out of easyJet’s control. We think the results it is starting to deliver from self-help measures, such as the dramatic increase in ancillary revenues, are particularly encouraging.”

“It’s not quite a full house though. Operating costs and start up losses form the recently acquired Air Berlin services are both higher than expected. These will likely be the focus for Johan Lundgren.”

Lungdren, previously a deputy chief executive at travel group Tui, took over as chief executive of the carrier earlier this year.