EasyJet suffered a sharp fall in annual profits – its first decline in six years – as the budget airline was hit by the weak pound and was forced to cut prices, reports The Guardian.
Currency movements cost the company £88m and results were affected by increased competition, a string of terrorist attacks that knocked traveller confidence and higher holiday costs for British customers.
Pre-tax profit for the year to the end of September dropped 27.9 per cent to £495m, at the top of the company’s guidance, on flat revenue of £4.7bn. The company cut its dividend by 2.5 per cent to 53.8p.
Carolyn McCall, easyJet’s chief executive, said the company’s performance was “resilient” in a difficult market for all airlines.
“There are no surprises in these numbers. We have had a very resilient year and a very good year when you think of the external shocks that have affected all airlines. Of course, there was the devaluation of the pound against the dollar, in which we buy our fuel, and against the euro,” McCall told Bloomberg television.
EasyJet shares, which have fallen 40 per cent this year, rose just over 1 per cent to £10.45 in early trading.
McCall, who has run easyJet since mid-2010, said the pound’s decline had affected easyJet more than its rivals because the company reports in sterling. EasyJet said the weak pound would affect next year’s results, reducing annual profit by about £90m.
McCall said fares would continue to fall amid economic and political concerns but that easyJet’s long-term prospects were good because people are flying more.
“There remains a degree of uncertainty for obvious reasons. Consumers are going to get brilliant value and from an airline point of view that means prices will be under pressure. We believe it will remain quite a difficult market and that pricing will remain under pressure.”
Fares are declining after the big fall in the price of oil encouraged rivals to increase their capacity, intensifying competition, McCall said. At least seven terrorist incidents during the year, including attacks on Belgium and France, had made people wary of flying, prompting fare cuts.
McCall said she did not expect Britain’s departure from the EU to disrupt easyJet’s operations. It will apply for an air operator certificate in another EU country where some planes will be registered but the company is keeping its head office at Luton airport, where it has been based since it was founded 20 years ago.
“Our headquarters would remain in Luton and the jobs we have in Luton would remain in Luton.”
