January 24, 2013 9:07 am

EasyJet buoyed as rivals reduce capacity

Capacity cuts over the slow winter season by rival short-haul airlines and a jump in the number of business travellers have buoyed first-quarter revenues at easyJet.

Europe’s second-largest low-cost carrier by revenues behind Ryanair on Thursday reported turnover in the final three months of last year up 9.2 per cent year-on-year to £833m, boosted by a 6.2 per cent increase in passenger numbers to 13.7m.

The Luton-based airline said that starting more flights to Italy, Switzerland and France during the final three months of the year – traditionally a slow period for airlines – would help the carrier narrow its expected interim loss.

“EasyJet has made a strong start to the year due to a combination of management action, competitor capacity reductions and the benign operating environment,” said Carolyn McCall, chief executive.

In an effort to coax business travellers away from full-service airlines such as Lufthansa and British Airways, easyJet has introduced flexible tickets and allocated seating.

Last year, easyJet carried some 10m business passengers – up from 9m the previous year – out of a total of roughly 60m.

EasyJet said that about 80 per cent of its seats for the first half to March 31 were already booked, leading the carrier to forecast an interim loss of £50m-£75m, which compares with a loss of £112m the previous year.

Airlines traditionally report a loss over the cooler months, relying on the peak summer travel period to offset winter capacity cuts and lower passenger numbers.

The carrier’s load factor – a key industry measure of how well easyJet fills its aircraft – rose 1 percentage point to 88.6 per cent for the quarter.

Average revenue per passenger – which excludes air passenger duty – rose 2.8 per cent year-on-year to £60.80 for the quarter, helping offset an 0.5 per cent increase in costs per seat, excluding fuel.

The airline also refused to take a backward step in its public spat with Sir Stelios Haji-Ioannou, confirming that it continued to evaluate the case for placing an order for new aircraft boasting more fuel-efficient engines, and is considering short-haul models by Airbus, Boeing and Bombardier.

“It is clear that there is a substantial operating cost advantage from the next generation engine technology,” said easyJet, adding that it was evaluating commercial offers from Airbus and Boeing.

Last week, Sir Stelios reignited his public feud with the low-cost carrier that he founded by selling off part of his stake in protest over easyJet’s fleet expansion plans.

The possible fleet expansion has long been opposed by Sir Stelios, whose family owns a 36 per cent stake in the carrier and who has agitated for increased dividends for shareholders and tighter controls over easyJet’s executive remuneration policy.

“The key takeaway from easyJet’s statement is a clear commitment, in our view, to a major new aircraft order that could raise the wrath of easyJet’s major shareholder,” said James Hollins, analyst at Investec.

EasyJet shares rose 5 per cent to 897.5p in afternoon trading.

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