The UK budget airline easyJet reported fiscal first-quarter revenue rose 7.2 per cent in the three months ended December 31, 2016, to £997 million, higher than the £982m predicted by analysts, with the passenger count up 8.2 percent to 17.4 million.
Revenue per seat, a measure of fares, fell less than expected amid resilient demand in the run up to the Christmas holidays, it said.
However, easyJet said a weaker pound in the wake of the Brexit referendum and higher fuel costs would weigh on 2017 full-year earnings more than expected.
Rising fuel costs and the faltering pound, which inflates easyJet’s foreign-currency expenses, will reduce earnings by £35m more than previously forecast, the company said on Tuesday.
Profits have also been hit by subdued travel demand following a string of terrorist attacks across Europe, and capacity expansion across the discount airline sector. The carrier has said it is planning an overhaul to cut costs and streamline operations to ease the strain.
“The analysts have not reflected the further weakness of the pound and they haven’t reflected the new fuel numbers,” said the chief executive Carolyn McCall.
The carrier previously said foreign exchange fluctuations would cost it £90m in the 12 months through September 2017. That figure has now grown to £105m, with another £20m of additional expenses for fuel. Excluding energy, costs per seat will rise by about 1 per cent this year.
“Guidance appears worse,” said Gerald Khoo, an analyst at Liberum in London. “We see downside risk to consensus.”
The carrier is due to decide on an EU state where it will apply for air operating rights allowing it to continue flying intra-continental routes even after the United Kingdom has formally quit the trade bloc, a move that will cost £10m over two years mainly to re-register its aircraft, it said. A charge of a £400,000 was incurred in the first quarter related to the process.
EasyJet cut £14m of costs in the first quarter through cheaper maintenance programmes and higher volume purchasing at its airports as well as the up-gauging of its fleet to bigger Airbus A320 aircraft.
The discount airline has also negotiated a shorter notice period with Airbus on any deferrals of its A320 family of jet, Ms McCall said, giving it more flexibility on its existing fleet.
“We have not activated any deferrals yet, that is still under review and that will be taken at board level as part of a strategic look at what we do,” she said. “We will be forensic about that.”
* Bloomberg
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