Easyjet caution hits air shares

Cautious comments by British budget airline Easyjet on the outlook for summer pricing hit its shares and those of rival airlines yesterday, overshadowing an increased profit target after a strong quarter.

The airline is seeking a replacement for chief executive Carolyn McCall, who is joining broadcaster ITV.

While Ms McCall said she was leaving Easyjet in a strong position, the comments on pricing highlight one of the challenges her successor will face.

Easyjet said revenues per seat were up 2.2% in its third quarter but expected yields to remain under pressure into its next financial year.

It said it expected full-year profit before tax to be in the range of £380m to £420m (€425m to €470m), above analyst consensus for £380m.

Easyjet said the wide range for its profit outlook reflected uncertainty over prices, echoing comments from other carriers.

“The third-quarter performed better than we anticipated, but as we’ve said in our guidance, for the fourth quarter we still see pressure on our yields coming through for the full year, and hence the range is quite broad,” Easyjet’s chief financial officer Andrew Findlay said.

The company’s shares briefly rose at the open, hitting its highest level since the UK voted to leave the EU last year, before reversing and dropping 5.6%. However, Easyjet’s stock remains up over 30% so far this year.

Shares in other European airlines also fell by between 2.7% and 6.2%. Ryanair, Air France-KLM and Aer Lingus/British Airways parent IAG report results next week.

Despite bumper summer bookings and profit upgrades, some European carriers have cautioned that pricing would remain tough as low fuel prices lead them to add seats, though at a slower rate of expansion than last year.

Lufthansa said on Monday after upgrading its 2017 profit target that it expected unit revenues to be down in the second half of 2017, after rising slightly in the first half.

Low-cost carrier Wizz Air, which also said its annual profit would be at the higher end of guidance, said on Wednesday it remained cautious on yields.

Easyjet also said it had received approval for an Air Operators Certificate in Austria, protecting its flying rights in the EU once the UK leaves the bloc.

The airline also said it would look at internal and external candidates for chief executive and there was no timing for announcing an appointment.

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