Given Johan Lundgren's experience working at tour operator TUI, it's no surprise to see him make a move into vacations. Up until fairly recently it was an untapped area for low-cost airlines, but many have now woken up to the financial benefits of packaging up flights and hotels.
EasyJet Plc wants to expand its holiday-tour unit and attract more business travelers, as the new chief executive moves the airline beyond the increasingly competitive discount model.
CEO Johan Lundgren, who joined in December, named five new top managers, led by the appointment of Garry Wilson to head the holiday arm — which will be the focus of increased investment. At the same time, Lundgren said he won’t bid for Norwegian Air Shuttle ASA, the budget specialist that’s received takeover interest, showing his focus is on gradual internal growth rather than transformational deals.
“EasyJet entered the holidays market a few years ago but hasn’t taken advantage of the opportunities it has in this area,” Lundgren said in a statement Tuesday. The carrier will seek to use its low cost base and airport network “to capture a significant share of the market.”
The shares rose the most since January after Luton, England-based EasyJet said its pretax loss narrowed to 18 million pounds ($24 million) in the six months through March 31.
Wilson previously worked at TUI AG, the world’s biggest tour operator, where the CEO himself was also once a senior executive. Lundgren also recruited Luca Zuccoli from personal-credit checker Experian Plc as chief data officer and appointed Flic Howard-Allen, formerly of Associated British Foods Plc and Marks & Spencer Group Plc, as group communications officer.
Lundgren, who became CEO after Carolyn McCall left to run ITV Plc, said EasyJet had one of its “best results ever in the winter trading period.” The demise last year of Monarch Airlines Ltd. and Air Berlin Plc, together with insolvency proceedings at Alitalia SpA, reduced competition in a traditionally weak travel season, while the timing of Easter gave a late boost to earnings.
The first-half loss narrowed from 212 million pounds a year earlier as the collapse of rivals helped Easyjet lift ticket prices and an early Easter boosted revenue. Analysts had predicted a loss of 74 million pounds, based on four estimates.
Excluding start-up costs for a new operation at Berlin Tegel airport the company would have posted a profit of 8 million pounds. Full-year pretax profit should be in a range of 530 million pounds to 580 million pounds, Lundgren said.
Sales increased 20 percent to 2.2 billion pounds, bolstered by a near 11 percent increase in revenue per seat, a measure of pricing.
“Despite the good news, costs remain a concern,” analysts at Sanford C Bernstein wrote in a note following the results. “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.”
EasyJet shares advanced as much as 4.9 percent in London. The stock was up 4.2 percent to 1,727.5 pence at 8:27 a.m.
In addition to the holiday-unit efforts, Lundgren said EasyJet will attempt to increase the number of passengers using the airline for business, and said he’d introduce a new loyalty program. Thomas Haagensen, managing director of EasyJet’s Austrian arm, becomes group markets director, and Lis Blair steps up to chief marketing officer.
©2018 Bloomberg L.P.
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Photo Credit: EasyJet CEO Johan Lundgren. Lundgren used to work at tour operator TUI. Bloomberg