EasyJet buckles in for a bumpy ride with profits set to take a tumble
Budget airline EasyJet is braced for a sharp fall in pre-tax profits when it gives a trading update this week.
A combination of terrorist attacks, air control strikes and a hefty price war with Ryanair have taken their toll on the carrier, analysts say.
They are expecting profit before tax in the year to end of September to be heavily down – predictions ranged from £497m-£517m. Profit before tax for 2015 was £686m.
The airline, which warned on profits in June, will provide a pre-close statement on Thursday, with full-year results being reported on 15 November.
Rob Byde, airline analyst at Cantor Fitzgerald told CityAM: “Profits are expected down due to weaker yield environment impacting all European carriers. The past year has seen a number of negative events, from terrorist attacks to air control strikes.”
Earlier this summer, EasyJet along with British Airways and Ryanair cancelled hundreds of flights due to strikes by French air traffic control unions. The Brussels terror attack and EgyptAir tragedy were then followed by the Nice attack and further instability in Turkey after an unsuccessful coup.
Meanwhile, fierce rival Ryanair threw down the gauntlet in May, announcing its fares would be cut by seven per cent, setting the scene for a price war. CEO Michael O’Leary said: “If other airlines want to compete with us on price, then we will lower our prices again. If there is a fare war in Europe, then Ryanair will be the winner.”
Brexit has also been a cause for turbulence. EasyJet boss Carolyn McCall had warned the UK's vote to leave the EU would hit her firm hard. Last month she noted that the Brexit vote had a short-term impact on UK consumer demand for holidays after sterling fell against the euro, though McCall said appetite for holidays had since normalised.
Despite this tough market, Byde said EasyJet was “generally trading well”.