easyJet Reports Narrowed Loss

easyJet has announced its results for the first half of the financial year have improved. Compared to the £153 million loss before tax last year, loss before tax for this first half improved 26.8% to £112 million. The improvement comes even though fuel costs rose £87 million. This was due to tight cost controls, revenue initiatives, careful allocation of capacity and very low levels of disruption compared to years past.

Pre-tax margin rose 4.5 percentage points from 12.1% to 7.6%, return on capital employed improved 2.5 percentage points from 7.5% to 5%, and loss per share fell 20.3% from 26.6p to 21.2p. Cash and money market deposits fell year-on-year by £226 million after a March £150 million special dividend payment, along with an ordinary dividend of £46 million. At the end of the period, the airline had £42 million in net cash.

Total revenue per seat increased 11.9% to £50.47, while seats flown rose 3.5% and average load factor increased 1.5 percentage points. The number of passengers easyJet flew increased 5.4% to 25.2 million, and the carrier continues growing its share of the short-haul business travel market. Total cost per seat rose 2.1% to £37.70. During the first half, easyJet delivered the best on-time performance at 89%, a 16 percentage point increase for flights arriving within 15 minutes of their schedule. This improvement was due to a seven percentage point rise to 85% in overall customer satisfaction.

easyJet chief executive Carolyn McCall says the airline has continued to deliver improvements in financial performance, customer satisfaction and operational performance over the first six months of the year. They have also returned £196 million to shareholders. The economic environment is still uncertain, and challenges still face the aviation industry (like APD). However, their strategy of low fares, focus on making it easy for travellers, tight cost management and carefully managed capital allocation will ensure the company is in the right position to deliver good results to shareholders.

McCall went on to say that average fares have increased throughout the industry because of higher fuel costs and tighter discipline with capacity. easyJet’s fuel bill rose 22% during the period, and with the price of oil being a key challenge, they expect it to remain high. The average fare was about 12% more across the network over the first half, but they don’t expect it to increase further in the second half. She recognises that their administration fee played a part in higher yields, but insisted the charge is fair and transparent. The rise in passenger numbers showed that the fee had been accepted, while new luggage charges also rose revenue by 63p per seat.

However, McCall added that there was robust growth in Switzerland and France. There is no question that fares are rising due to rivals’ capacity being decreased. More travellers are booking and paying more.

Sir Stelios Haji-Ioannou, the founder of easyJet and its biggest shareholder, questioned when the airline’s shareholders would join the boycotting seen at Aviva and William Hill in recent weeks. His immediate reaction is to welcome the reduced losses reported by the carrier. However, a £112 million loss for the first half still isn’t a reason to celebrate – especially as improved revenue has been driven by increased fares more than cost control.