Easyjet reports expected fall in profits

PROFITS at Easyjet, the British low-cost airline, fell by 28% to £51.5m (€74.6m) for the year ended September in line with market expectations.

Revenues were up 69% at £932m but increased costs arising from the group’s expanding operations affected profits. Fuel costs, airport charges and aircraft leasing payments all doubled during the year.

A strong second-half performance was crucial in turning around the airline’s first-half loss of £48.1m. The first six months of the year saw Easyjet suffer from weak economic conditions and a downturn in air travel caused by uncertainty before the conflict in Iraq. The group also blamed the SARS virus outbreak for its first-half performance. Chief executive Ray Webster said it had been a year of two halves but that he was encouraged by the full-year results and cautiously optimistic about the airline’s future performance.

Passenger numbers increased by 79% during the year as the group integrated Go, the smaller low-cost airline that was previously owned by British Airways. Chairman Colin Chandler said the airline would focus on improving margins in the current year.

Easyjet has ordered 120 new Airbus aircraft, which will be added to the fleet over the next four years. It will gradually phase out the 34 non-standard Boeing aircraft from its fleet in an effort to increase efficiency and reduce costs.

Seventy percent of Easyjet’s revenues come from traffic between Britain and Europe, with 22% generated by domestic routes within the UK. The group’s average fare fell by 6.7% to £43.28.

David Jennings of Davy stockbrokers said Easyjet’s fare environment had improved from its first half position, when average fares were down by over 10%. He expected Easyjet to be careful to get its timing right with future capacity increases and said the company would not add significant capacity until early next year.

Easyjet’s business is seasonal as it relies on traffic in the summer months for the greater part of its revenues.