EasyJet said it’s working to streamline operations as the slump in the pound after Britain’s decision to quit the European Union is set to weigh more on earnings next year.
Chief Executive Officer Carolyn McCall has ordered a review aimed at producing a “simpler, more efficient organization” together with “meaningful” savings, the Luton, England-based company said in a statement Tuesday.
Exchange-rate movements will cost EasyJet almost £180 million in the 12 months through Sept. 30, 2017, it said. That’s up from £88 million in the year just ended, when pretax profit plunged 28 per cent to £495 million, in line with guidance issued by McCall on Oct. 6.
The June 23 Brexit vote extended a slide in the pound that has inflated EasyJet’s euro- and dollar-denominated costs and which may discourage Britons from traveling abroad. At the same time terror attacks from France to Turkey have hurt demand and fares amid a capacity glut encouraged by the lower oil price.
EasyJet cut its 12-month dividend payout by 2.5 percent to 53.8 pence as a result of the profit decline, and didn’t provide an estimate for fiscal 2017 earnings. While the company will book unspecified charges for the restructuring plan, details of which have yet to be disclosed, it said the measures should begin to bring down costs six to nine months after being implemented.
McCall said EasyJet will still boost capacity 9 percent in fiscal 2017, adding: “In a tougher operating environment strong airlines like EasyJet will get stronger, and we will build on our already well-established network.”
Shares of EasyJet traded 2.1 percent higher at 1,054 pence as of 8:10 a.m. in London, paring their decline this year to 40 percent and valuing the company at £4.17 billion.
The stock gained 3 percent on Nov. 3 after High Court judges said a vote must be held in Parliament before Britain starts the two-year countdown to exiting the EU. The government has said it will appeal that decision.
News by Bloomberg, edited by Hospitality Ireland