EasyJet swings to loss on effects of terrorism and currencies

Low-cost carrier easyJet swung to a loss in its half-year numbers on Tuesday, reporting a loss before tax of £24m for the six months to 31 March, against a £7m profit a year earlier.

The Luton-based FTSE 100 firm saw total revenue grow 0.3% over the same period, to £1.771bn from £1.767bn.

EasyJet's loss before tax beat consensus estimates of a profit before tax of £26m and if excluding foreign exchange effects it made a profit before tax of £5m. EasyJet’s loss per share was 5.1p, against earnings per share of 1.3p in the first half of 2015.

The airline did have more capacity - 34.5 million seats against 32.2 million - and carried more passengers - up to 31 million, from 28.9 million - but load factor remained stagnant, at 89.7%.

But following a 4.2% decline in the first half, easyJet warned it expected revenue per seat to decline by 7% year-on-year at constant currency in the third quarter.

"EasyJet has delivered a robust financial performance during the half year despite the well-publicised external events,” said chief executive Carolyn McCall, referring to terror attacks in France, Egypt and Belgium which have hampered the airline and leisure industries.

"Underlying consumer demand has been strong with UK beach traffic providing a healthy start to the half and easyJet's biggest-ever ski season helping to deliver increased passenger numbers and higher revenue during the first half,” she explained.

McCall said consumers have enjoyed lower fares for the second consecutive year, decreasing by 6% year-on-year, with the benefits of lower fuel costs passed on to passengers while active cost control has protected the airline’s margins.

She said the performance during the period was a clear demonstration of the strengths of easyJet’s network and its service.

"We are confident that over the full year we will again grow passenger numbers, revenue and profit

“As a result of easyJet balance sheet and the board’s confidence in the future success of the business, the annual dividend payout ratio will increase by a quarter to 50% subject to AGM approval,” McCall confirmed, which was a great boost to the shares.

Also she confirmed 2016 profit expectations remained in line with market expectations, with the Bloomberg consensus PBT at £726m and Reuters' at £717m.

Analysts at Credit Suisse said the "starkly weak" pricing guidance was a worry and expect April to have seen up to a double digit rate of decline, before May/June see moderation to a low-to-mid single digit run rate, which the company expects to continue into the fourth quarter.

CS trimmed its 2016 PBT by 1% to £722m albeit by 5% in 2017 and 2o18 given an uptick in market wide fuel tailwind pass-through rates. As a result it cut its target price for the shares to 1,985p from 2,137p.