EasyJet sets sights on business and holiday-tour travellers
London — EasyJet says it wants to expand its holiday-tour unit and attract more business travellers as new CEO Johan Lundgren moves the airline beyond an increasingly competitive discount market.
Lundgren named five top managers on Tuesday, led by the appointment of Garry Wilson from TUI Airways, to head the holiday arm, which will become a focus for investment along with a new loyalty programme and measures to target corporate travellers. The stock rose following a smaller-than-expected first-half loss.
EasyJet is targeting a broader range of markets as the discount sector becomes an increasingly tough battleground, with network carriers setting up their own cut-price units and Ryanair expanding operations. Lundgren said he would not be muscling in on the bidding for Norwegian Air Shuttle after IAG had two approaches rejected, and had no plans to enter the long-haul, low-cost market, where the Scandinavian company is a pioneer.
"We are not interested in buying Norwegian. We’re going to focus on our core," Lundgren, who is Swedish, said on a conference call with journalists. "We have a lot of plans and initiatives." Neither will England-based EasyJet become part of a wider bid group with other carriers, he said.
EasyJet still intends to be "on the right side" of a consolidation trend in European aviation and remains interested in bidding for the short-haul operations of failed Alitalia, according to Lundgren, who joined in December. That approach was initiated by his predecessor Carolyn McCall, now CEO of broadcaster ITV.
Lundgren’s focus on leisure harks back to his own career at TUI, the world’s biggest tour operator, where he ran the UK business. EasyJet entered the vacation sector a few years ago but has so far failed to fully exploit its low-cost base and network of holiday routes from major airports, according to the CEO, who says he’s targeting "a significant share" of the market. Among changes, the carrier aims to develop a closer relationship with hotel operators.
EasyJet will attempt to increase the number of corporate passengers by modifying its schedule to add "a business-bias" on certain routes and introducing a new online portal to allow small-and medium-sized companies to book more easily. The carrier plans to enhance a loyalty programme of which less than 10% of customers are currently members.
EasyJet’s first-half result was one of its "best-ever" for the winter trading period, the CEO said. The demise in 2017 of Monarch Airlines and Air Berlin, together with Alitalia’s insolvency, reduced competition in the traditionally weak travel season, bolstering fares, while the timing of Easter gave a late boost to earnings.
The pretax loss narrowed to £18m from £212m a year earlier after analysts had predicted a £74m deficit. Excluding start-up costs for a new operation at Berlin Tegel airport EasyJet would have posted a profit of £8m.
EasyJet shares advanced as much as 4.9%, hitting their highest price intraday price since 2015, with the stock trading up 2.1% at 1,720 pence as of 11.49am in London.
Sales jumped 20% to £2.2bn, aided by a near 11% increase in revenue per seat, a measure of pricing. Full-year pretax profit is forecast to be in a range of £530m to £580m.
"Despite the good news, costs remain a concern," analysts at Sanford C Bernstein wrote in a note. "We see a risk that EasyJet’s medium-term cost reduction targets will become increasingly challenging to achieve as current initiatives do not appear to be sufficient to prevent unit cost inflation."