Transport Airlines

Business Travelers Have Become the Secret to EasyJet’s Success

Oct 03, 2013 5:38 am

Skift Take

EasyJet has been able to play the nice guy in the low-cost carrier battle against rival Ryanair. As the latter makes a move to improve its customer service, easyJet still needs to find additional ways to differentiate itself.

— Jason Clampet

The Future of Meetings in the Hospitality Industry

 / Reuters

An EasyJet Airbus aircraft is seen at Ljubljana's airport Brnik. / Reuters


EasyJet Plc, Europe’s second-biggest discount carrier, said full-year profit increased at least 48 percent as the U.K. company attracted more corporate and leisure customers on routes where network carriers are withdrawing.

Pretax profit for the 12 months to Sept. 30 will be in the range of 470 million pounds to 480 million pounds ($763 million to $779 million), EasyJet, which had year-earlier earnings of 317 million pounds, said today in a statement. That compares with the 471 million-pound average estimate of 20 analysts.

EasyJet is ramping up efforts to draw business passengers with allocated seating, flexible tickets and higher frequencies on key routes, and began fast-tracking flexi-fare clients in May. While cuts at network airlines helped lure 10 million corporate travelers in 2012, the Luton-based carrier may face a more hostile environment through the winter as rivals like Ryanair Holdings Plc slash fares and others boost capacity.

“The winter isn’t going to be easy for any of the operators, there is a general competitive increase, but EasyJet has tools at its disposal to offset the pricing pressure,” said Donal O’Neill, an analyst for Goodbody Stockbrokers in Dublin. “The largest part of EasyJet’s growth has been taking market share from bigger players.”

‘Tight Control’

EasyJet rose 2.1 percent to 1,342 pence before trading little changed at 10:59 a.m. in London. The stock has risen 71 percent in 2013 for a value of 5.2 billion pounds.

“EasyJet has delivered a strong performance in the last twelve months due to management action to generate value to our customers and maintain a tight control of costs,” Chief Executive Officer Carolyn McCall said in the statement.

Under McCall, EasyJet has targeted corporate connections, multiplying frequencies on services attractive to business clients while adding new routes from London to Moscow and between Milan and Rome Fiumicino airport.

A potential 86 million short-haul passengers flying from Europe’s top 20 airports each year could be surrendered to EasyJet by network carriers because they don’t feed lucrative long-haul services, the executive said in July.

Revenue per seat grew about 6 percent at a constant currency rates in the fiscal fourth quarter, driven by sales in July and August, the airline said. EasyJet, which had previously given a 450 million pound to 480 million pound range for full- year pretax profit, said it has sold over 25 percent of seats available for the first half of the new year.

Capacity Threat

Still, the carrier may face tougher competition this winter with intra-European capacity expected to grow as much as 6 percent, according to Deutsche Bank analysts Anand Date and Geof Collyer. This compares with two years of negative or minimal growth, the analysts said.

“We think outlook is more important than usual this year because out early indicators suggest that winter 2013-2014 is going to be challenging,” the analysts said. “We remain relatively cautious for fiscal year 2014.”

Ryanair, Europe’s biggest discount airline, said in September that it may miss its full-year profit target, citing greater price competition and some capacity increases. The Irish carrier said it planned to slash airfares and ground jets from November through March. Aer Lingus Group Plc also trimmed forecasts after the summer heat wave weighed on bookings.

EasyJet said today that it is 67 percent hedged at an average price of $984 a metric ton of jet fuel for the year ending September 2014. At current prices and exchange rates the first-half fuel bill will be as much as 30 million pounds higher than a year earlier, with exchange rates having an additional 10 million-pound negative impact.

The airline is 78 percent hedged on its dollar requirements at an average rate of $1.57.

Editors: Christopher Jasper, Robert Valpuesta. To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net. To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net. 

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