EASYJET PROFITS HIT BY EXTRAORDINARY EVENTS RELATING TO TERRORISM AND PLUNGE OF THE POUND
Low-cost airline easyJet has revealed it will take a hit of more than £200 million from the plunging pound and a series of “extraordinary events” after terrorist attacks and air traffic control strikes have taken their toll.
The carrier warned it will be left nursing at least £125 million in lost profit after a combination of terror attacks across Europe, Egypt and Tunisia as well as air traffic control strikes in France and political turmoil in Turkey.
EasyJet added that the tumbling value of the pound since the Brexit vote – hitting fresh 31-year lows against the US dollar this week – would cost it £90 million.
The group said it was expecting profits for the year to September 30 to nosedive by nearly a third, to between £490 million and £495 million.
It has slashed fares by around 9% year-on-year to boost demand as it has also battled a price war with Ryanair.
EasyJet boss Carolyn McCall said: “We have been disproportionately affected by extraordinary events this year.”
She added: “The current environment is tough for all airlines, but history shows that at times like this the strongest airlines become stronger. That is why we will continue to invest for the long-term success of the business.”
EasyJet insisted it had “performed strongly in a difficult operating environment for all European airlines”.
The travel industry has been knocked hard by a string of terrorist attacks in Belgium and France as well as Tunisia, while airlines are still not flying to Egyptian resort Sharm el Sheikh after a Russian aircraft crashed soon after take-off.
Tour operators and airlines have also had to switch away from once popular sun-seeker destination Turkey after an attempted coup earlier this year.
There have been fears over the future of UK airline Monarch as it rushes to secure investment, while Low Cost Holidays collapsed earlier this year, affecting more than 140,000 customers.
EasyJet’s action to cut fares and launch a marketing push over the peak summer season saw a record number of passengers fly with the group over the three months to the end of September, at 22 million.
But its load factor – a measure of how well it fills it planes – dropped from to 91.1% in September from 93.1% a year earlier.
It also cautioned that the falling value of the pound will continue to impact the group into 2017 as it will make fuel more expensive to buy in US dollars.
Shares in easyJet dropped by as much as 9% at one stage after the update before paring back losses, with experts saying trading conditions are set to remain tough.
The group’s expectations for full-year profits are around 5% lower than forecast in the City and mark a sharp decline on the £686 million posted a year earlier.
Airline analyst Gerald Khoo at Liberum said the update laid bare the tough conditions and warned the “challenges of the past year seem set to continue”