Easyjet sinks into the red

No-frills airline easyJet sank into the red today after cutting fares to boost passenger numbers.

The low-cost carrier ran up pre-tax losses of £48m (€67.2m) in the six months to March 31 compared with a profit of £1m (€1.4m) in the same period last year.

It also said it was cutting 50 middle-management jobs to remove duplication following the takeover of rival budget operator Go last year.

The cuts come on top of 116 job losses resulting from the recently-announced closure of its call centre at Stansted as part of the integration process.

Irish rival carrier Ryanair was quick to make the most of easyJet’s results, offering its customers 66,000 free seats – 1,000 for every million euros easyJet lost.

EasyJet said today that efforts to raise the proportion of passengers to seats in Go to levels seen in the rest of the fleet had led to increased price-cutting.

Although passenger numbers were up 40%, average tickets prices were 11% lower in the six-month period.

While easyJet has traditionally made a loss in the first half of its financial year before the peak summer season begins, with the exception of last year, the current figure was almost five times bigger than its next largest published first-half year loss.

The company blamed the effects of the Iraq war and the fact that Easter fell later this year – putting it outside the period – for the large losses.

April saw passenger volumes surge by 33%, benefiting from the Easter holiday as well as “pent-up demand” from the previous months with saw the build-up to the war in Iraq.

But chief executive Ray Webster said forward bookings indicated that revenues in May would be similar to levels seen last year and that June would be weaker.

He added that it was too early to predict the financial outcome for the full year with the likely effects of the crucial summer period still unclear.

Stripping out costs from integrating rival budget airline Go and its aborted takeover of German airline Deutsche BA, losses were £24.4m (€34.2m) compared with underlying profits of £8.3m (€11.6m) in the same period last year.

But investors were unshaken by the figures, which were broadly in line with what the City expected.

Shares were up 3% today at 193p.