easyJet PLC (LON:EZY) has taken a £15mln hit related to the disruption caused by illegal drones at Gatwick Airport over the Christmas period.
In a trading update for the first quarter ended December 31, the budget airline said drones sighted at the airport last month led to the cancellation of more than 400 flights and affected about 82,000 customers.
The company paid £10mln for “customer welfare costs”, representing 1 percentage point of cost per seat in the quarter. The chaos carved £5mln off revenues for the period due to cancelled flights.
READ: easyJet profits soar as it benefits from rivals' woes but shares fall on concerns about costs
As a result, total revenue per seat fell by 4.2% at constant currency. Revenues were also dragged lower by integration issues following the acquisition of some of collapsed Air Berlin’s assets at Berlin Tegel airport.
On of top of that, there were one-off benefits in the year-ago period that were not repeated including the bankruptcies of Air Berlin and Monarch along with Ryanair flight cancellations in the face of strike action.
The adoption of IFRS 15 accounting standards had an £8mln revenue impact in the quarter.
Excluding one-off items, underlying revenue per seat increased by 1.5%.
Passenger numbers rise as capacity expands but load factor falls
Total revenue for the quarter gained 13.7% to £1.3bn.
Passenger revenue grew 12.2% to £1.0bn as the number of passengers carried rose by 15.1% to 21.6mln, driven by an 18.2% increase in capacity to 24.1 seats. The number of extra seats was slightly lower than planned, however, due to the drone issues.
Ancillary revenue was up 19.9% to £271mln on the back of improved sales of checked bags and seat selection.
The load factor, a ratio measuring the number of passengers against the number of seats available, fell by 2 percentage points to 89.7% due to the impact of comparing the period against a strong first quarter last year and issues with the first time flying at Tegel where the schedule is still in the early stages of optimisation.
Full-year profit to meet market forecasts
Chief executive Johan Lundgren said booking levels for the first half of the year are “encouraging” despite the uncertainty surrounding Brexit.
“Second half bookings continue to be ahead of last year and our expectations for the full year headline profit before tax are broadly in line with current market expectations."
About 40% of forward bookings have been secured for the second quarter but easyJet expects revenue per seat at constant currency to fall by “mid to high single digits” in the first half due to a later Easter this year, a £50mln hit from IFRS 15 and tough competition in Berlin.
The Tegel operations are anticipated to post a loss for the year.
The consensus market forecast for full-year pre-tax profit stands at £580mln, according to Bloomberg.
Foreign exchange movements will have a £10mln adverse impact on full-year profits, easyJet said.
easyJet expects capacity to expand by 10% for the year while the headline cost per seat, excluding fuel and at constant currency, is forecast to be flat.
The total fuel bill is estimated to reach £1.46bn, up from £1.18bn last year.
Brexit preparations
easyJet said it was well prepared for the UK’s exit from the European Union on March 29 with 130 aircraft registered in Austria, plenty of spare parts in the EU27 and the transfer of crew licences.
“Both the EU and the UK have committed to ensuring that flights between the UK and EU will continue in the event of a no-deal Brexit,” the group said.
Shares rose 3.5% to 1,203p in morning trading.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said integration challenges with Tegel operations and drones at Gatwick did not blow profits off course.
"New planes have driven substantial increases passengers and revenues, and the group’s also getting better at selling passengers additional services – think extra leg room, priority boarding and microwaved paninis," he said.
"Integrating the old Air Berlin routes from Tegel airport is proving more of a challenge than initially expected, and that’s weighing on margins and adds pressure to deliver results over the summer.
"Fortunately Brexit disruption seems to be minimal so far, and while meeting full-year expectations may be a bit more of a stretch from here, they’re still very achievable.”