EasyJet sparks hopes for special dividend by lifting profit forecast

British airline, EasyJet is giving an increased forecast for upcoming full-year earnings in the latest indication of the success of its low-cost model. The forecast has spurred hopes of a lucrative reward to shareholders.

EasyJet’s cheap fares have helped it and rival Ryanair weather an increasingly competitive European short-haul market, while traditional airlines have struggled to compete.

The trend has been highlighted by a recent two-week strike by pilots at Air France over issues relating to a new discount airline, which helped propel some customers to rivals such as EasyJet.

The company, whose shares rose 7% in early trading yesterday, said it expected to report a pre-tax profit in the range of £575m-£580m, as much as 6% more than guidance given in July.

The raised forecast put EasyJet, Europe’s second-largest low-cost carrier behind Ryanair, on track to make its largest-ever ordinary dividend payout, after it said in September it planned to reward shareholders with 40% of pre-tax profit, above the previous one-third distribution.

“We think EasyJet will continue to take market share from the flag carriers in key markets such as Germany, France and Italy as these companies attempt to restructure their own short-haul operations,” said analyst, Robin Byde at Cantor Fitzgerald, which has a “buy” rating on the stock.

Mr Byde added he believed there was a significant chance of EasyJet announcing a special dividend at the time of its full-year results on November 18.

Analysts at Jefferies said a special payout could also be on the cards: “A £100m special dividend is possible in November, but more likely in full-year 2015.”

Last year, the company announced a £175m special dividend at the time of its full-year results.

- Reuters