EasyJet expects fares to rise, as it benefits from rivals’ woes
London — EasyJet said its fares are set to rise this winter, buoyed by the collapse of carriers including UK-based Monarch Airlines and capacity cuts at main European rival Ryanair.
The demise of Monarch and Germany’s Air Berlin, a bankruptcy filing at Italy’s Alitalia and Ryanair’s move to scrap part of its timetable because of a staffing crisis were "all very good news for EasyJet", CEO Carolyn McCall said on Tuesday.
EasyJet shares rose the most in three years after the Luton, England-based carrier said revenue per seat — a measure of prices — should increase in the six months to end-March after a drop last year, excluding the impact of taking over some Air Berlin routes.
McCall, who stands down as CEO before the end of the year, said the shakeout of Europe’s airlines has benefited EasyJet structurally and given Europe’s second-biggest discount airline strong momentum going into fiscal 2018. The retreat of rivals comes as a boost after the weaker pound weighed on last year’s earnings.
Ryanair has cancelled more than 20,000 flights after failing to adequately prepare for new pilot-vacation rules.
McCall said that had been a positive development, while declining to reveal which routes were benefiting.
The failure of Monarch on October 2 eliminated capacity at EasyJet’s Luton and Gatwick hubs, and while the defunct company’s operating slots are set to be reallocated they’ll no longer be concentrated at a single rival.
"The first half is looking extremely positive and that is as a direct result of the dislocations in the market," McCall said on Bloomberg TV.
Revenue per seat should increase by a low to mid-single digit percentage in the six months through March, versus a 0.4% drop in fiscal 2017.
Heading into next summer, higher oil prices are likely to result in further pressures for carriers, McCall said, so that "the strong will get stronger and the weak will get weaker".
EasyJet itself was "very well hedged", she said.
The stock advanced as much as 7.5% on Tuesday, the biggest gain since October 3 2014, and was trading 7% higher at 1,367p at 11.18am in London, taking gains this year to 36% and valuing the company at £5.43bn.
EasyJet’s pretax profit for the year ended September 30 fell 17% to £408m, according to a statement, hurt by sterling’s slide and a glut of seating in European markets. That is in line with guidance given in October.
The company said it was too early to comment on the outlook for next summer, while estimating that taking over Air Berlin plane leases and slots at the German capital’s Tegel airport would incur losses of about £60m in financial 2018, plus £100m in one-off expenses. The acquisition should close next month.
McCall joined EasyJet as CEO in July 2010 from Guardian Media Group, and is returning to her roots to head UK broadcaster ITV.
She said she had met with successor Johan Lundgren and would see him a couple more times. "If I have any tips I’m going to give those to him privately," she said.