Easyjet PLC (LON:EZJ) shares came under pressure as investors ignored a bullish update for the final quarter and focused on the cost and pricing pressure faced by the industry.
Just days after Monarch collapsed and as Ryanair offered its pilots improved pay and conditions, Luton-based easyJet said profits this year will be at the high end of its forecasts.
READ: EasyJet profits at top end as passenger numbers hit record
Passengers numbers and seats filled (load factor) hit record levels over the summer and as a result annual profits will come in near the top of its guidance of £405-410mln, the airline said.
Carolyn McCall, chief executive, added: "The current turmoil in the sector provides easyJet with opportunities to capitalise on its strong customer proposition and grow and strengthen our positions in Europe's leading airports still further.
But the airline also revealed competition on pricing cut revenue per seat by 1.4% over the second half and by 3.7% in the final quarter while easyJet also took a £100mln currency hit.
EasyJet, like Ryanair and others, is continuing to boost capacity, which analysts say is a reason for the fierce competition.
READ: Monarch’s sharp descent helps rival airliners to fly higher
The sector is expected to add a further 5% to seats (capacity) over the next year, while easyJet is pencilling in a 6% rise to follow the 8% seen in the final quarter of the year just ended.
Neil Wilson, at ETX Markets, said although easyJet looks set to benefit from Ryanair passengers rebooking and the collapse of Monarch, the update highlighted key pressures for the sector.
Overcapacity a problem
”Overcapacity and aggressive pricing is pressuring the sector. Airlines continue to increase available seats and cut fares to grow market share and this is coming at the expense of profit margins. The problem of over-capacity and overly-aggressive pricing is not going away until we see more consolidation.
Liberum, a consistent bear of easyJet, added: “For 2018E, management expects continued downward pressure on unit revenue from ongoing market capacity growth, although easyJet should still benefit from the unwinding of past expensive fuel hedges.
“We remain cautious on the trading environment, despite recent airline failures being likely to remove some capacity from the market.”
Hargreaves Lansdown, though,was more upbeat: "The demise of Alitalia, Air Berlin and Monarch has relieved some of the over-capacity issues in the sector, and while Michael O'Leary [Ryanair’s boss] may now have extended an olive branch to pilots in the form of better conditions and pay, the disruption at Ryanair has gifted easyJet an opportunity."
Shares in easyJet fell 3% to 1,247p.