EasyJet CEO says carrier ‘not feeling rival’s pain’ on pricing
Gary NoakesEasyJet’s boss has stressed the airline is not suffering the same downturn in revenue flagged by rival Ryanair earlier this week.
Ryanair blamed "frugal passengers" for a 46% downturn in profits this April, May and June to £338 million, with chief Michael O’Leary promising "materially lower" fares in the coming months.
During the same period, easyJet’s profits increased by 33%, albeit to a lower headline figure of £236 million.
EasyJet chief executive Johan Lundgren, who is hopeful of a record-breaking summer, said there was an overlap between the two carriers of “just about 20%”, which meant easyJet was not having the same difficulties as Ryanair.
He added easyJet’s in-house tour operator, easyJet holidays, which the group sees as a £250 million pound business, was “making a difference” to profitability. “It’s up from £49 million to £73 million,” he said.
Lundgren said prices were holding up despite an 8% increase in capacity. “Looking at fares, it’s pretty much in line with last year, a £73 average."
He added booking habits remained late: “We have seen customers booking closer to date of departure and we expect to see that continue into the summer peak.
"It’s looking healthy going forward – people will gravitate towards value and the attraction of our network.”
Julie Palmer, partner at business advisor Begbies Traynor, said easyJet’s results should be seen as “a sigh of relief" after Ryanair’s numbers, one proving "it is not all doom and gloom".
“Performance in easyJet holidays is a standout," said Palmer. "That this side of its business is seeing such a marked surge in customer growth and revenues is impressive amid an increasingly discerning customer base.
"What is most reassuring though is the expectation that Britain’s biggest budget airline is on track to deliver a record-breaking summer; and that’s despite signs of the travel boom waning and a holiday season that is being blighted by strikes and air-traffic control mishaps yet again.
"With a very mixed picture emerging from the wider sector, easyJet will have to work very hard to allay concerns about depressed ticket prices over the coming months, but it certainly appears to be better placed than most to withstand the current headwinds."
EasyJet is aiming for a £1 billion profit across all its airline and tour operations in “three to five years”.
Chief financial officer Kenton Jarvis, who will take over from Lundgren as chief executive in January, explained the airline targeted a profit of “£7 to £10 a seat” and planned to carry 100 million passengers this year.
“We are looking to grow around 5% per annum and therefore in the medium term believe we can make £1 billion a year,” he said.
Analysts expect the group to make £6 per seat this year, with expectations of around a £600 million profit.
EasyJet’s bullish outlook comes despite a warning from industry veteran Noel Josephides that package prices have "tanked" and predictions of overcapacity this summer are materialising.
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