Ryanair dealt fresh blow as top executive joins EasyJet

Ryanair shares tumbled more than 3% on news that its outgoing chief operating officer Peter Bellew is to join main rival EasyJet.

Ryanair dealt fresh blow as top executive joins EasyJet

Ryanair shares tumbled more than 3% on news that its outgoing chief operating officer Peter Bellew is to join main rival EasyJet.

Mr Bellew’s departure from Ryanair was announced last week and was seen as a surprise.

This was partly because he quit as Malaysia Airlines CEO to rejoin Ryanair less than two years ago and partly because he was seen as a leading candidate to take over the day-to-day running of the airline when current CEO Michael O’Leary moves to head up the enlarged group, which now includes three airline brands.

The announcement that Mr Bellew is to join EasyJet as chief operating officer is the latest in a string of body blows taken by Ryanair in recent months.

Earlier in the summer, the airline reported its weakest annual profit in four years and said earnings may suffer for the next couple of years due to continued low fares.

There is still the prospect of strike action being taken by its pilots in certain markets, particularly the UK, and this week it said it is likely to carry five million fewer passengers in its current financial year - and possibly be forced to temporarily close some of its European bases — due to the grounding of Boeing’s 737-Max.

Ryanair’s shares have tumbled by around 36% in the past 12 months.

EasyJet announced Mr Bellew’s appointment as the UK budget airline reported third-quarter trading in line with expectations — boosted by more customers taking optional-extra services — enabling it to reiterate its full-year profit forecasts.

“Our customers experienced significantly reduced cancellations and long delays largely as a result of our investment in operational resilience, which also contributed significantly to driving down cost per seat in the period,” said EasyJet chief executive Johan Lundgren.

EasyJet said revenue for the three months to the end of June increased by 11.4% to £1.8bn (€2bn), driven by more bookings, initiatives to optimise its pricing and more ancillary revenue from additional services such as allocated seating and luggage check-ins.

The third-quarter passenger tally increased 8% to 26.4m.

The company’s shares —themselves, down 33% in the past 12 months — rose by over 4% on the update.

EasyJet chief executive Johan Lundgren.
EasyJet chief executive Johan Lundgren.

The robust trading, at a time when many in the industry are struggling, comes despite a general softening of demand due to tougher economic conditions across Europe as well as Brexit-related consumer uncertainty in Britain, it said.

“Make no mistake — it is still tough out of there. It is still a challenging environment... but I think what we are seeing is that the actions we are taking ourselves is having a positive effect,” Mr Lundgren said.

“We’ve been pleased with how the late trading has come in, which has been supported by these initiatives,” he said.

EasyJet said it expected to deliver a profit before tax of between £400m and £440m, in line with market expectations, and Mr Lundgren said that second-half forward bookings were at 78%, giving the airline better visibility.

Mr Lundgren said that EasyJet’s strategy on capacity wouldn’t change in response to anything a competitor was doing.

“But... I think it’s good to see that discipline in capacity is coming back into the marketplace, and we are no exception to that,” he said.

Analysts at RBC reiterated an “outperform” rating on the stock, adding that EasyJet was well placed to bounce back from a tough 2019 for the industry.

“With 2019 effectively written off by investors, the (outperform rating) key is 2020’s prospect for less supply, revised capex, and better profits,” RBC analyst Damian Brewer said in a note.

Additional reporting by Reuters and Bloomberg

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