EasyJet predicts strong growth

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EasyJet said it expected full-year pre-tax profits to rise by between 40 and 50 per cent in 2007, following a 56 per cent rise to £129m in 2006.

The low-cost airline said passenger revenues per seat would continue to improve in the second quarter after a 4 per cent increase in the first quarter.

Fuel costs for the first half will be 7 per cent higher than last year but for the 12 months to September they are forecast to be slightly lower.

Ancillary revenues from sales of insurance, car hire and other services are picking up momentum. Within a 4 per cent rise in total revenues per seat, ancillary revenues increased 22 per cent year-on-year in the first quarter with further acceleration expected. By contrast, passenger revenue per seat was up 2.3 per cent.

Capacity growth in the year to September is expected to be 15 per cent. Yields will be pressured by strong year-earlier comparitors.

In the first quarter, passenger numbers were up 9.8 per cent at 8.1m, largely due to increased capacity in Switzerland and Italy. The load factor declined by 0.5 per cent to 81.7 per cent.

Earlier in the week, rival Ryanair said that passenger numbers had increased by 19 per cent in the third quarter, while passenger revenues rose by 28 per cent helped by the 7 per cent increase in average fares.

Despite the profits forecast from EasyJet, which was to the top end of market expectations, the share price had slipped more than 2.5 per cent to 672½p by mid-morning. Analysts at Collins Stewart said in a note that Easyjet’s valuation was now looking stretched in comparison with Ryanair. By contrast, Oriel Securities’ view was that any risk was on the upside with the possibility that pressure on yields would be less than expected.

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