The board, management, and beancounters at easyJet will have an extra spring in their step with the news that the low-cost airline is expecting a 2019 full-year profit of £420-430 million before tax. Just as Delta Air Lines across the Atlantic has benefitted from the 737 MAX debacle, easyJet’s revenues are turbocharging on the back of disruptions at British Airways and Ryanair.
In a trading update released yesterday, Tuesday, October 8, 2019, easyJet announced the expected end of year pre-tax profit figure, saying the £420-430 figure was in the upper range of its previous guidance. But easyJet says there were other factors at play in addition to problems at British Airways and Ryanair. The trading update also attributed the solid financial result to “robust passenger demand and the delivery of self-help initiatives.”
Impressive figures despite a “challenging environment”
Nonetheless, easyJet said 2019 had been a challenging environment in which to operate. But easyJet’s raw numbers are impressive. Capacity this year will be 105 million seats, up 10.3% on the previous year. The airline has some 110 aircraft on order with Airbus and a steady stream of deliveries increasing capacity.
On the back of this, passenger numbers are expected to be up 8.6% to 96 million in 2019. Owing to capacity growth outpacing growth in passenger numbers, load factors will drop 1.4% to a still-healthy 91.5%.
However, operating costs will be up by 12% on 2018. This is due to increased capacity but also external factors beyond an airline’s control, such as rising fuel costs and foreign exchange fluctuations. The fuel bill alone for easyJet in 2019 is expected to be £1,420 billion.
Despite these external challenges, easyJet is happy with its expected profits in 2019. Johan Lundgren, easyJet’s Chief Executive said;
“easyJet has continued to perform in line with expectations… Our implementation of initiatives in the fourth quarter to optimise yield has led to solid revenue performance with total revenue per seat at constant currency set to increase for the full year. We have continued to invest in operational resilience, with the programme successfully reducing the impact of disruption on our operations.”
Profit pushed along by problems at BA and Ryanair
Mr Lundgren also attributed the disruptions at British Airways and Ryanair as helping easyJet push its 2019 profit skywards.
British Airways has taken a hit this year with pilots running a sustained program of threatened and actual industrial action against the airline, culminating in a strike last month. The airline was forced to cancel more than 2,000 flights, lost more than 300,000 passengers and endured an 8% decline in overall passenger numbers in September 2019.
British Airways estimated that the industrial action cost it £139 million. In addition, other disruptions such as threatened industrial action by Heathrow employees cost the airline a further £33 million. It has forced the airline’s parent company, IAG, to issue a profit warning.
Meanwhile. Competitor Ryanair has also had to deal with a pilot strike that ran over consecutive and non-consecutive days. While the pilots (belonging to the same union as the British Airways pilots) were fighting for better employment agreements, Ryanair was battling a 21% fall in quarterly profits attributed to falling passenger fares and increasing fuel and staff costs.
But easyJet has escaped these travails. While both Ryanair and British Airways are facing falling profits, easyJet’s profit is heading upwards. While the low-cost carrier isn’t without its critics, 96 million passengers, a load factor of 91% and a pre-tax 2019 profit in the upper range of expectations emphatically suggests the airline is doing something right.