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EasyJet Sees Profits Soaring After Rivals Falter

Published on May 16 2018 3:00 PM in General Industry tagged: easyjet / Investec / Johan Lundgren

EasyJet Sees Profits Soaring After Rivals Falter

British low-cost airline easyJet expects profits to rise more than 30% this year as it benefits from strong travel demand and the collapse of some smaller rivals.

Looking to build on that momentum, new CEO Johan Lundgren also said he would expand the company's holiday business, loyalty scheme and business offering.

EasyJet, Europe's second-biggest low-cost airline behind Ryanair, swung to a profit for the six months ended March 31, helped by the timing of Easter and the collapse of British rival Monarch last year and Italy's Alitalia going into administration, pushing more customers to easyJet.

The company said that would help to drive annual profits up to 530-580 million pounds ($718-$786 million), at least 30% higher than last year's headline result and around 5-15% above analysts' current forecasts.

The forecast includes losses that easyJet expects to incur from its costly expansion into Berlin's Tegel airport last year, when it bought part of failed airlineAir Berlin's operations.

Shares in easyJet, which have gained 40% over the last six months, rose 3% to stand at 1,735.5 pence, the biggest rise in Britain's FTSE-100 blue-chip index.

"These should be seen as a very positive set of results, with encouraging trends for yields which should also bode well for Ryanair," Investec analysts said in a note.

ORGANIC GROWTH

Europe's airline market has seen significant consolidation over the last year. Lufthansa and easyJet both bought parts of failed Air Berlin last year, and more recently British Airways-owner IAG said it was interested in buying low-cost, long- and short-haul carrier Norwegian.

EasyJet has expressed an interested in Alitalia, but Lundgren said it did not want to buy any part of Norwegian.

"We're not interested in participating in any bidding in Norwegian. We have a great set of plans on our own," he told reporters on a call.

"Alitalia is the one that we have said publicly we're engaging in discussion and that's all we can say for now."

Looking to its future strategy, easyJet said it would invest more in its holidays business, with Lundgren positioning the company to take market share from his former employer, the tour operator TUI, and its rival Thomas Cook.

Lundgren, who took over from Carolyn McCall in December, also said he would focus on attracting more business passengers and introducing an expanded loyalty programme to deliver increased profit per seat from 2020.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition. 

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