EasyJet Soars Above Brexit Black Clouds

While EasyJet is busy Brexit-proofing its business ahead of the UK’s departure from the European Union in March 2019, it seems consumers are happy to continue booking flights.

The low-cost airline said it had seen no drop-off in demand with UK bookings for next summer ahead of 2018. For whatever reason, the public doesn’t seem worried despite the threat of the divorce happening without a deal between the two sides.

“I believe that we are as well prepared as we can be and we have spent the last 2 years preparing for both the…deal and the no deal scenarios. We remain confident that flying will continue. However, we continue to monitor the current developments carefully,” CEO Johan Lundgren said on a conference call Tuesday with journalists after the publication of the company’s full year results.

In July 2017, UK-based EasyJet announced it was setting up a subsidiary based in Vienna, Austria called EasyJet Europe, which would enable it to “continue to operate flights both across Europe and domestically within European countries after the UK has left the EU (regardless of the outcome of talks on a future UK-EU aviation agreement).”

Ownership Changes

One Brexit-related issue that EasyJet is keeping a close eye is its ownership structure.

The EU requires that nationals of member states (plus Switzerland, Norway, Iceland and Liechtenstein) must own more than 50 percent of an airline, a rule that presents a problem for carriers with a significant UK focus to their holding shares.

Should the UK and EU agree a deal before March 29, then a transition period will kick in, meaning that the UK will effectively still be a member state — but with no representation — for around 21 months. This would see the status quo continue.

However, if there is a no-deal situation, then EasyJet would need to find a way of shifting its EU ownership from 47 percent to above 50 percent.

“EasyJet currently expects to take action in respect of its level of ownership by non-qualifying nationals only if there is a real risk of a ‘no-deal’ Brexit in the run up to 29 March 2019 and if the proportion of equity capital held by qualifying nationals (excluding UK nationals) remains below the required level of 50 percent plus one share,” the company said.

Disruption Threat

For airlines flying to and from the UK the big worry was that if there was a no-deal scenario, that flights would face disruption because there would effectively be no rules governing operations.

The threat of this happening has receded somewhat in recent weeks after the EU issued a guidance note outlining its thinking. Aside from reaffirming the ownership requirements, the EU indicated it would be happy to grant temporary flying rights for carriers. The UK has said it would do the same.

“We would feel much more comfortable today in saying that disruptions on or after March 29th – if any – will be very limited, and likely negligible from an investor’s point of view, than we would have just a few weeks ago,” said analysts at Bernstein in a note to investors.

Full-Year Results

EasyJet reported a 16.8 percent increase in revenue to $7.6 billion (£5.9 billion.) Pre-tax profit rose 15.6 percent to $572 million (£445 million.)

Passenger numbers grew 10.2 percent to 88.5 million with load factor up 92.9 percent from 92.6 percent in the prior year. Both of these were record totals.