UK’s easyJet reports first annual profit slide in six years

Europe's second-biggest budget carrier sees earnings decline by more than a quarter, the first fall since 2009, and predicts further pain next year.

An easyJet plane approaches Gatwick Airport in southern England. The budget carrier sees further turbulence ahead. Toby Melville / Reuters

The British low-cost airline easyJet said it expected currency headwinds and measures to mitigate Britain’s vote to leave the EU to hit earnings again in 2017 after reporting its first fall in annual profit in six years.

For the 12-months to the end of September, easyJet, Europe’s second-biggest no-frills carrier behind Ryanair, posted a 28 per cent drop in pretax profit to £495 million (Dh2.27 billion), a first decline since 2009, although at the upper end of a £490m to £495m range given in October.

The weak sterling following the Brexit vote resulted in an £88m hit to easyJet’s profit in its 2015-16 financial year and the carrier said on Tuesday it expected a further impact of £90m in the 12 months to September 2017.

Update:

EasyJet said it is working to streamline operations as the slump in the pound after Britain’s decision to quit the European Union is set to weigh more on earnings next year.

The chief executive Carolyn McCall has ordered a review aimed at producing a “simpler, more efficient organisation” together with “meaningful” savings, the Luton, England-based company said on Tuesday.

Exchange-rate movements will cost easyJet almost £180 million (Dh821.4m) in the 12 months through September 30, 2017, it said.

The June 23 Brexit vote extended a slide in the pound that has inflated easyJet’s euro and dollar-denominated costs and which may discourage Britons from travelling abroad. At the same time terror attacks from France to Turkey have hurt demand and fares amid a capacity glut encouraged by the lower oil price.

“EasyJet achieved a resilient performance in 2016, in the face of significant challenges including a series of external events and foreign exchange headwinds,” Ms McCall said.

EasyJet cut its 12-month dividend payout by 2.5 per cent to 53.8 pence as a result of the profit decline, and did not provide an estimate for fiscal 2017 earnings. While the company will book unspecified charges for the restructuring plan, details of which have yet to be disclosed, it said the measures should begin to bring down costs six to nine months after being implemented.

Ms McCall said easyJet will still boost capacity 9 per cent in fiscal 2017, adding: “In a tougher operating environment strong airlines like easyJet will get stronger, and we will build on our already well-established network.”

Shares of easyJet traded 2.1 per cent higher at 1,054 pence as of 8:10am in London, paring their decline this year to 40 per cent and valuing the company at £4.17 billion.

The stock gained 3 per cent on November 3 after High Court judges said a vote must be held in Parliament before Britain starts the two-year countdown to exiting the EU. The government has said it will appeal that decision.

* Agencies

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