EasyJet annual profit slides but shares rally on outlook

[LONDON] EasyJet's annual net profit slumped by almost one third on strong competition and a Brexit-fuelled slump in the pound, the British no-frills airline revealed on Tuesday.

But its share price was up 5.6 per cent at 1,349 pence in mid-morning deals on a positive outlook, according to analysts.

Profit after tax slumped 30 per cent to £305 million (S$547 million) in the 12 months to Sept 30 compared with a year earlier, EasyJet said in an earnings statement.

The company took a hit of £101 million owing to sterling's retreat, which made dollar-priced jet fuel more expensive.

At the same time however, a relatively low oil-price environment resulted in airlines cutting ticket prices, ramping up competition across the industry and further hurting EasyJet's bottom line.

EasyJet pointed to "an aggressive pricing environment which saw (its) net ticket revenue per seat fall by 7.8 per cent at constant currency".

The group added that total revenue grew eight per cent to £5.05 billion in its financial year, while pre-tax profit was down 17 per cent.

"EasyJet delivered a robust performance during a difficult year for the aviation industry, flying a record 80 million passengers," said the carrier's outgoing chief executive Carolyn McCall, who announced her upcoming departure in July.

Looking ahead, Tuesday's earnings update provided "signs of a break in the clouds", noted George Salmon, equity analyst at stockbroker Hargreaves Lansdown.

"Forward reservations are up on last year, and the trend for rising costs and lower prices is set to reverse in the coming months," he added.

EasyJet is set to benefit also from the collapse last month of British short-haul carrier Monarch, as well as its recent part-purchase of bankrupt Air Berlin.

EasyJet is meanwhile among several airlines to have submitted bids for a slice of Italy's ailing Alitalia.

It has been a tough few months for the no-frills sector, with Ryanair cancelling thousands of flights largely owing to a pilots shortage.

NEW LEADERSHIP

EasyJet will meanwhile be hoping for better fortunes under new management. After seven years at the helm, Ms McCall is to become chief executive of British television channel ITV.

Johan Lundgren, the former deputy of TUI travel group, will from December replace McCall, who has overseen a trebling of EasyJet's share price while heading the company.

One of her final tasks has been the purchase of some Air Berlin operations for 40 million euros (S$64 million).

Back in July meanwhile, EasyJet applied for a new air operator's certificate in Austria to continue flying across Europe regardless of the final Brexit deal between Brussels and London.

Britain's airline industry has soared over the last two decades under the Single European Sky system, which lifted trade restrictions on EU airlines.

Unless British negotiators manage to secure preferential conditions, British airlines could lose this status once the country leaves the European Union in 2019.

AFP