Transport Airlines

EasyJet posts record profits thanks to down economy and better options for business travelers

Nov 20, 2012 8:22 am

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EasyJet is intelligently putting more emphasis on the customer experience, as it has significantly reduced its cancellations and delays through the “EasyJet turn project,” and is trying to improved the boarding process through a push for allocated seating.

— Dennis Schaal

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EasyJet has registered record profits as fuller planes, benign weather and cost-conscious business travellers saw the airline’s revenues surge.

Chief executive Carolyn McCall said EasyJet was in “a unique position to grow” against longer established rivals such as British Airways and that the board’s increased confidence meant that they would be paying out a higher dividend – worth around £32m to the founder and largest shareholder, Sir Stelios Haji-Ioannou.

McCall said the airline was “getting real traction” with business travel, after getting on the booking systems for travel management companies for big employers and introducing allocated seating on planes. The new, chargeable seating option removed a “definite barrier” for business travellers, she said, as well as being popular with older people and families who want to sit together.

She said: “Allocated seating has been taken up by many people you might not expect. Our main aim is to get it right operationally, where the boarding process is really good, and that will take market share from the legacy carriers.”

The pre-tax profits of £317m for the year to 30 September came despite ever-higher fuel costs. The airline carried 58 million passengers, up 7% year on a year, with 10% fewer empty seats, and noted a late summer boost with post-Olympic holidaymakers. McCall said increasing brand recognition in France and Italy was pushing demand.

She said: “These results demonstrate that easyJet is a structural winner in the European short-haul market against both legacy and low-cost competition.” From forward sales, McCall forecast further, single-digit growth in the coming year.

A spokesman for Sir Stelios said he was “very pleased” and that the board appeared to have listened to his demands in cancelling aircraft orders and rewarding shareholders.

Analysts warned of “cost headwinds” in the coming year. Gerald Khoo of Espirito Santo said he would assume “a relatively subdued 2013 for easyJet, with cost headwinds from fuel, exchange rates, higher airport charges and a more normal level of operational disruption compared with a surprisingly benign 2012.”

Shares in the company rose 3% to a value that puts it just outside the FTSE100, but McCall insisted she was not motivated by the prospect of breaking into the top flight: “You can’t control the share price. It’s not an ambition.”

EasyJet announced it would be starting flights from Manchester to Moscow in the spring, as well as the new route from London Gatwick to the Russian capital, having beaten Virgin to the rights granted by the CAA. An additional plane at Manchester will also bring new services to Prague and Thessaloniki in Greece.

Pilots’ union Balpa accused the airline of making its record profits on the back of casual labour. Jim McAuslan, Balpa’s general secretary, said: “The travesty is that more and more of those pilots at the bottom are employed on casual and zero-hour contracts through middlemen and employment agencies, who have no job security and who carry huge personal debts incurred because they also have to pay for their own training.”

EasyJet said that unlike other low-cost carriers they recognised the union, and that total payments meant their cadets earned roughly double the £1,600 a month salary Balpa quoted. McCall said: “We are talking to Balpa at the moment. We have been very clear that we have been trying to arrange a lifestyle and pay deal – including contracts for permanent staff. So we are discussing how to offer permanent contracts for most of our pilots … that would mean our cadets would after two years be given permanent jobs.”

McCall also said she would be pushing the government’s Davies Commission on airport capacity to consider expansion at EasyJet’s Luton base. “We believe it has far more potential to be seen as a key London airport, it’s very accessible to affluent north London areas and the home counties.”

This article originally appeared on guardian.co.uk

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