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EasyJet profits rise on late summer surge EasyJet posts record profits and doubles dividend
(about 5 hours later)
Low-cost airline easyJet has pledged to pay a higher dividend after outperforming the sector with a 28% rise in full-year profit that was helped by a surge in late summer demand. EasyJet has registered record profits as fuller planes, benign weather and cost-conscious business travellers saw the airline's revenues surge.
Europe's second-largest budget airline after Ryanair reported a pretax profit of £317m on revenues 11.6% higher at £3.85bn for the year to the end of September. Chief executive Carolyn McCall said EasyJet was in "a unique position to grow" against longer established rivals such as British Airways and that the board's increased confidence meant that they would be paying out a higher dividend – worth around £32m to the founder and largest shareholder, Sir Stelios Haji-Ioannou.
In October easyJet had said it was expecting to report an annual pretax profit of £310m-£320m. McCall said the airline was "getting real traction" with business travel, after getting on the booking systems for travel management companies for big employers and introducing allocated seating on planes. The new, chargeable seating option removed a "definite barrier" for business travellers, she said, as well as being popular with older people and families who want to sit together.
The Luton-based airline more than doubled its full-year dividend to 21.5p from 10.5p and announced plans to increase future handouts to shareholders. The company's shares were up more than 3% on Tuesday morning to 675p. She said: "Allocated seating has been taken up by many people you might not expect. Our main aim is to get it right operationally, where the boarding process is really good, and that will take market share from the legacy carriers."
"In light of the continued strong financial performance of easyJet and the confidence in easyJet's position within European short-haul aviation, the board has decided to amend the dividend policy from this year," said Carolyn McCall, who has helped double the airline's profits since she took over as chief executive in July 2010. The pre-tax profits of £317m for the year to 30 September came despite ever-higher fuel costs. The airline carried 58 million passengers, up 7% year on a year, with 10% fewer empty seats, and noted a late summer boost with post-Olympic holidaymakers. McCall said increasing brand recognition in France and Italy was pushing demand.
The group would seek "to pay out one-third of profit after tax each year, up from the one-fifth payout introduced last year". She said: "These results demonstrate that easyJet is a structural winner in the European short-haul market against both legacy and low-cost competition." From forward sales, McCall forecast further, single-digit growth in the coming year.
EasyJet's strong performance bucks tough conditions elsewhere in the airline sector where several carriers have been hit by a toxic mix of high fuel costs, weak consumer confidence and the eurozone crisis. A spokesman for Sir Stelios said he was "very pleased" and that the board appeared to have listened to his demands in cancelling aircraft orders and rewarding shareholders.
Earlier this month IAG's Spanish airline Iberia announced plans to axe almost a quarter of its staff and rationalise its network under a restructuring plan. Germany's Lufthansa, which has already slashed hundreds of jobs, said it would step up cost cutting to counter rising fuel prices and limited growth in its core market. Analysts warned of "cost headwinds" in the coming year. Gerald Khoo of Espirito Santo said he would assume "a relatively subdued 2013 for easyJet, with cost headwinds from fuel, exchange rates, higher airport charges and a more normal level of operational disruption compared with a surprisingly benign 2012."
Since the start of the year airlines, including the loss-making Spanair and Hungarian flag-carrier Malev, have ceased operations, leaving gaps in the market that low-cost competitors have been quick to exploit. Shares in the company rose 3% to a value that puts it just outside the FTSE100, but McCall insisted she was not motivated by the prospect of breaking into the top flight: "You can't control the share price. It's not an ambition."
EasyJet, the largest carrier at London's Gatwick airport, said a strong rise in summer bookings from Britain to Malaga and Alicante in Spain and Faro in Portugal had helped, while it also increased the number of flights between top business destinations during the year. EasyJet announced it would be starting flights from Manchester to Moscow in the spring, as well as the new route from London Gatwick to the Russian capital, having beaten Virgin to the rights granted by the CAA. An additional plane at Manchester will also bring new services to Prague and Thessaloniki in Greece.
The carrier said passenger numbers rose 7.1% to 58.4 million during the year, with load factors – a measure of how full its planes are – up 1.4 percentage points to 88.7%. Pilots' union Balpa accused the airline of making its record profits on the back of casual labour. Jim McAuslan, Balpa's general secretary, said: "The travesty is that more and more of those pilots at the bottom are employed on casual and zero-hour contracts through middlemen and employment agencies, who have no job security and who carry huge personal debts incurred because they also have to pay for their own training."
The airline, which will fly between London, Manchester and Moscow from next year, said its profit margins grew by 1 percentage point to 8.2% during the year, despite a £182m increase in its fuel costs. EasyJet said that unlike other low-cost carriers they recognised the union, and that total payments meant their cadets earned roughly double the £1,600 a month salary Balpa quoted. McCall said: "We are talking to Balpa at the moment. We have been very clear that we have been trying to arrange a lifestyle and pay deal – including contracts for permanent staff. So we are discussing how to offer permanent contracts for most of our pilots ... that would mean our cadets would after two years be given permanent jobs."
It expects its fuel bill to be around £30m higher in 2012/13. McCall also said she would be pushing the government's Davies Commission on airport capacity to consider expansion at EasyJet's Luton base. "We believe it has far more potential to be seen as a key London airport, it's very accessible to affluent north London areas and the home counties."