Shares tumble for easyJet after airline reveals £35m hit to finances
Low cost airline easyJet has revealed another £35 million hit as it takes a hammering from the weak pound, while it also outlined the impact of last month's Christmas market attack in Berlin.
The budget carrier said the weak pound was now expected to cost it around £105 million over its 2016/17 financial year, up from the £90 million estimated in November, with fuel expenses also falling by less than expected.
The group added on top of the extra £35 million fuel and pound bill, it also saw a financial impact in the "low millions" from the deadly truck attack in Berlin, which killed 12 people on December 19, as bookings to the city dropped in the immediate aftermath.
It is also forking out £10 million for an air operation certificate as it sets up a new operating company in mainland Europe and applies for a new licence to secure flying rights of 30% of its routes after Brexit.
Shares tumbled by 9% after the update.
The airline said revenues per seat fell 8.2% as it continued to slash prices in the face of competition from the likes of rival Ryanair, but the group said this marked an improvement.
It is cutting costs across the group to weather the difficult trading from the weak pound and increased competition as part of a group-wide review.
Carolyn McCall, e asyJet chief executive, said the airline delivered a "solid" first quarter to December 31 in the face of "tough" conditions.
" The weakness of sterling and the impact of fuel combined are £35 million worse than previously expected, but easyJet has made good progress in reducing costs in those areas where we have more control such as engineering, maintenance, non-regulated airports and overheads," she added.
It said it carried 8.2% more passengers in the Christmas quarter, at 17.4 million, but its load factor - a key industry measure of how well airlines fill their planes - fell to 90% from 90.3% a year earlier.
The group added that around 56% of expected bookings for the second quarter have now been secured, which is "slightly ahead" year on year.
But easyJet confirmed it is expecting revenue per seat for the first half to decline by "high single digits", knocked by the timing of Easter and the impact of the Berlin attack.
Ken Odeluga, market analyst at City Index, said shares in the group plunged as "widening exchange rate pain is once again taking a toll on sentiment".
"After a bruising 2016, easyJet investors have understandably latched on to the continuing drag on profitability from Brexit-hit sterling," he said.
EasyJet revealed its first fall in annual profits for six years in November after being buffeted by the plunging pound, terrorism fears and air strikes.
The group posted a 27.9% tumble in pre-tax profits to £495 million for the year to September 30, after the sharply weaker pound cost it £88 million and it suffered a blow of around £150 million from ''unprecedented'' events.
Sir Stelios Haji-Ioannou, founder of easyJet and the airline's largest shareholder, hit out at the carrier's strategy after the update sent shares plunging.
He said easyGroup would vote a "token" 15 million shares against the re-election of easyJet chairman John Barton - representing around 3% of easyJet's stock - in protest at its plan to add more planes to its fleet.
Mr Haji-Ioannou added: " Clearly other investors are extremely unimpressed by the decline in the revenue per seat.
"I am not trying to unseat John Barton, but we do want to send a public message to focus investor attention on the fleet plan presented by the management twice yearly alongside the results presentation," he added.