EasyJet profits climb but Norwegian bid ruled out

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 short-haul rivals but its new chief executive said it has no plan to muscle in the bidding battle for long-haul carrier Norwegian Air Shuttle.

Johan Lundgren said he has no plans to enter the long-haul low-cost market even as Norwegian rejected two approaches from IAG--the Aer Lingus and British Airways owner.

“We are not interested in buying Norwegian. We’re going to focus on our core,” Mr Lundgren, who is Swedish, said on a conference call with journalists. “We have a lot of plans and initiatives,” he said.

Neither will the Luton-based airline become part of a wider bid group with other carriers, he said.

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 £530m to £580m (€658m), at least 30% higher than last year’s headline result and around 5% to 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 airline Air Berlin’s operations.

“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

Shares in easyJet, which have gained 40% over the last six months, rose over 2%.

EasyJet said it wants to expand its holiday-tour unit and attract more business travellers.

Mr Lundgren named five top managers, led by the appointment of Garry Wilson from TUI to head the holiday arm, which will become a focus for investment.

EasyJet is targeting a broader range of markets as the discount sector becomes an increasingly tough battleground, with network carriers setting up their own cut-price units and Ryanair expanding operations.

EasyJet will attempt to increase the number of corporate passengers by modifying its schedule to add “a business-bias” on certain routes and introducing a new online portal to allow small- and medium-sized companies to book more easily.

Mr Lundgren, who ruled out further aircraft purchases in the near term, named other top managers to help see through the initiatives. He recruited Luca Zuccoli from personal-credit checker Experian as chief data officer and appointed Flic Howard-Allen, formerly of Associated British Foods and Marks & Spencer, as communications head. Thomas Haagensen, managing director of easyJet’s Austrian arm, becomes group markets director, and Lis Blair steps up to chief marketing officer.

The 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 (ICAG.L) said it was interested in buying low-cost, long- and short-haul carrier Norwegian (NWC.OL).

EasyJet still intends to be “on the right side” of a consolidation trend in European aviation and remains interested in bidding for the short-haul operations of failed Alitalia, according to Mr Lundgren. That approach was initiated by his predecessor Carolyn McCall, now chief executive of broadcaster ITV.

Mr Lundgren’s focus on leisure harks back to his own career at TUI, the world’s biggest tour operator, where he ran the UK business.

EasyJet entered the vacation sector a few years ago but has so far failed to fully exploit its low-cost base and network of holiday routes from major airports, according to the CEO, who says he’s targeting “a significant share” of the market.

Meanwhile, Air France-KLM shares fell by over 2% as it named finance chief Frederic Gagey as interim CEO to replace Jean-Marc Janaillac, who quit after failing to end a series of strikes that have roiled the airline’s French arm since February.

The change at the top comes in the midst of a dispute that French Transport Minister Elisabeth Borne termed “preoccupying”, saying Air France is less competitive than both the KLM arm of the carrier and rival Lufthansa. The company has said the strikes have cost more than €400m.

The carrier, created in 2004 by the merger of French and Dutch national airlines, was thrown into turmoil this month when Mr Janaillac said he would resign after employees rejected a wage offer. Since then, French ministers including Ms Borne have warned that Air France-KLM’s future is in jeopardy and urged local unions to end the conflict.

Reuters and Bloomberg


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