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EasyJet warns of £125 million lost profit after year of 'extraordinary events'

Published 06/10/2016

The FTSE 100 Index was down 29.1 points to 7,004.29
The FTSE 100 Index was down 29.1 points to 7,004.29

Budget airline easyJet dragged the London market lower after spate of terror attacks and the plunging pound inflicted a hefty blow to profits.

The FTSE 100 Index was down 33.29 points to 6,999.96, following a dismal update from the airline, stating that a series of "extraordinary events" had left it nursing £125 million in lost profit.

EasyJet has been grappling the fallout of terror attacks across Europe, Egypt and Tunisia, air traffic control strikes in France and political turmoil in Turkey, while it said the post-Brexit vote plunge in the pound will also cost it £90 million.

Shares were down nearly 7% or 69.5p to 933.5p, with negative sentiment spreading to British Airway's owner International Consolidated Airlines Group (IAG), which dropped 15.5p to 381.3p.

George Salmon, equity Analyst at Hargreaves Lansdown, said easyJet should also be concerned about rivals encroaching on its territory.

"The group say that weaker sterling is making going abroad less affordable for the average Brit, while the rising threat of terrorism is putting customers off too.

"These are industry-wide factors, however the competition is hotting up too. Other airlines are looking covetously at easyJet's market share, with pressure coming from both the budget players Wizz and Ryanair, and 'premium economy' offerings like Vueling."

While the London market paused for breath after coming close to an all-time high on Tuesday, the pound continued to struggle on the currency markets.

Sterling plumbed new depths against the greenback, falling 0.7% to hit a fresh 31-year low of 1.264 US dollars.

The pound was also well down against the euro, dropping 0.3% to reach a five-year low of 1.134 euro.

Concerns that the Government will opt for "hard Brexit" by breaking away from the single market to tighten controls on immigration have taken its toll on the pound in recent sessions.

However, Connor Campbell, financial analyst at Spreadex, said a Brexit warning from German Chancellor Angela Merkel was also causing problems for sterling.

"It seems that we are firmly back in Brexit-dominating territory - even the mildest squawkings from the news wire are causing pain for the pound.

"Today it was the turn of Angela Merkel to make sterling's life even more difficult, the German leader resolute in her claim that freedom of movement is a must if Britain wants to stand any chance of remaining in the single market."

The price of oil rose 1% to 52.39 US dollars a barrel following reports on Wednesday that US crude inventories fell for a fifth consecutive week.

Brent crude prices were also buoyed by growing hopes of an output cut, with Opec oil ministers and Russia's energy minister set to meet at a conference in Istanbul, Turkey.

In UK stocks, Aviva was down 10.1p to 443.3p, Kingfisher was off 5.2p to 375.2p and British Land Company dropped 19.5p to 596p as a number of companies went ex-dividend.

Away from the top tier, homewares retailer Dunelm was the biggest faller on the FTSE 250 after "unusually warm weather" took its toll on sales.

Like-for-like sales at stores plummeted 5.1% in the 13 weeks to October 1, dragging down revenue by 1.8% to £198.7 million.

Shares were down more than 4% or 34.5p to 823p.

The biggest risers on the FTSE 100 Index were Croda International up 53p to 3,611p, TUI up 15p to 1,129p, Carnival up 46p to 3,831p, Barclays up 1.8p to 174.3p.

The biggest fallers on the FTSE 100 Index were easyJet down 69.5p to 933.5p, IAG down 15.5p to 381.3p, Fresnillo down 61p to 1,614p, Capita down 23p to 632.5p.

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