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Risk Warning
21/01/2011
Low-cost airline EasyJet has blamed the rising cost of fuel and a £31 million hit from strikes and bad weather for its higher-than-expected losses this winter.
The carrier yesterday forecast a pre-tax loss of between £140m and £160m for the six months to 31 March, up from a £78.7m deficit in the same period a year earlier. It typically posts losses in its first half, which covers the slower autumn and winter months, but shares tumbled 16 per cent.
The Luton-based airline - famous for its bright orange and white livery - said disruption from strikes by air traffic controllers in France and Spain and severe weather across Europe in December cost it £6m and £18m respectively, and in addition led to lost contribution of £7m. EasyJet said it was working to recover a significant proportion of those losses "through additional costs savings and revenue opportunities."
The current market price of jet fuel, $897 a metric tonne compared to $681 a year ago, means fuel costs are anticipated to be around £1.17 a seat higher year-on-year.
But passenger numbers were up 8.8 per cent to 11.9 million in the first quarter compared to a year earlier, and EasyJet said revenue in the final three months of 2010 rose 7.5 per cent to £654m.
The group, which earlier this month confirmed an order for 15 Airbus A320 aircraft, said second-half sales looked "robust" and that full-year forecasts were "broadly unchanged", assuming no more disruption and excluding the additional fuel costs.
EasyJet chief executive Carolyn McCall said the company had delivered a "solid trading performance" against a difficult backdrop and had improved its position in mainland Europe.
But she called for action from governments and airports to help reduce future disruption.
McCall said: "EasyJet will always support its passengers when external events impact their journey but we call on governments to provide sensible legislation for airport regulation and air traffic control.
"The severe snow disruption of the past two years also highlights the need for airports to invest in the appropriate infrastructure to keep passengers moving."
EasyJet shares fell 73.8p to close at 382p. Other airlines suffered in its wake.
Richard Curr, head of dealing at Prime Markets, recommended buying EasyJet if shares dipped below 390p, pointing out that the carrier boasted cash and money market deposits of £1.28 billion excluding restricted cash.
He said: "The economic outlook in Europe remains uncertain and the higher market price of fuel will inevitably put pressure on margins in the short term.
"However, the strength of the EasyJet network combined with its proposition of offering consumers the best value fares to convenient airports means that it is well positioned."
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