EasyJet said fare levels in Europe were set to rise this winter after it benefited from the woes of Ryanair and other rivals to post record passenger numbers in the last year, prompting its departing CEO to say she was leaving the airline in good shape.
The shares climbed 7% in London at one stage, valuing the budget airline at almost £5.43bn (€6.11bn). Ryanair shares were also up, gaining almost 3% in Dublin trade, to value the airline at €21.55bn.
EasyJet’s Carolyn McCall landed her last set of results before joining British broadcaster ITV as CEO in January. She will be replaced at Europe’s second-biggest budget airline by Johan Lundgren, a former executive at travel group TUI.
EasyJet’s strong performance came after a tumultuous few months for the European airline industry, with Monarch, Air Berlin, and Alitalia all going into administration this year.
EasyJet said that the resulting reduction in market capacity, made worse by a spate of cancellations at bigger rival Ryanair, was now helping to support prices. Ryanair cancelled more than 20,000 flights after failing to adequately prepare for new pilot-vacation rules.
“We have taken advantage of capacity coming out,” Ms McCall told reporters.
Underlying profits before tax for the year to the end of September fell by 17% to £408m, within a forecast range of £405m to £410m and largely due to a £101m hit from exchange rate moves.
Analysts are now looking to Ms McCall’s successor Mr Lundgren to keep a tight rein on costs when he takes over at the start of December, when he must also quickly get to grips with the airline’s planned purchase of parts of Air Berlin.
Unit costs per seat increased in the last financial year by 2.4% to £53.52, mainly as a result of the fall in the value of sterling. It said unit revenues per seat fell 0.4% to £58.23 pounds, “reflecting a currency benefit, strong ancillary revenue and increased load factors, alleviating ticket pricing pressures”.
Looking ahead, the company said operations at Berlin’s Tegel airport would run a headline loss of around £60m in 2018, with one-off costs of around £100m. Much of the costs will come from leasing crewed planes to build up operations over the winter and early summer, with the first flight from Tegel expected to take place in early January.
“The first half is looking extremely positive and that is as a direct result of the dislocations in the market,” Ms McCall said. Heading into next summer, higher oil prices are likely to result in further pressures for carriers, she said so that “the strong will get stronger and the weak will get weaker.”
Reuters, Bloomberg, and Irish Examiner