EasyJet up 5% on upgrade

Equities

After Ryanair delivered a major profit upgrade, EasyJet also seems to have been a beneficiary of more solid demand and a more favourable capacity environment. To wit, the collapse of Thomas Cook has been a boon for low-cost airlines that operate in regions vacated by the defunct tour operator. 

EasyJet upgraded its outlook to a key revenue metric with the benefits of the Thomas Cook failure, cost discipline and better ancillary revenues partially offset by French strikes. To be fair, if any airline worried particularly about strikes in France they are in the wrong game; it goes with the turf. For H1 management expect revenue per seat to increase in the mid to high single digits, compared to previous guidance of low to mid-single digits. Headline loss for H1 is seen better than the -£275m in 2019. FX moves are seem having a £70m positive impact on headline profit before tax.  

EasyJet is probably the biggest gainer from Thomas Cook’s collapse, particularly as it bagged lucrative airport slots. EasyJet snapped up 12 summer and 8 winter slots at Gatwick, and 6 summer and 1 winter at Bristol for £36m. Strikes at BA and Ryanair have also been to the benefit of EasyJet. 

Considering the profit upgrade announced in October, it’s been quite the turnaround since last May when EasyJet was warning about higher fuel costs, overcapacity in the market, the pinch of rising labour costs and FX headwinds all hitting margins. 

Key stats for quarter to end of Dec 2019 

  • Total group revenue for the quarter ending 31 December 2019 increased by 9.9% to £1.425bn. Passenger revenue increased by 9.7% to £1.124bn and ancillary revenue increased by 10.8% to £301 million. 
  • Passenger numbers in the quarter increased by 2.8% to 22.2 million, driven by an increase in capacity of 1.0% to 24.3 million seats. Load factor increased by 1.6 percentage points to 91.3%. 
  • Total airline revenue per seat increased by 8.8% at constant currency, outperforming expectations.  

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