Easyjet PLC (LON:EZJ) has insisted it is on track to hit its profit targets this year after a “robust” performance over the past few months.
The low-cost carrier confirmed it should deliver a pre-tax profit of between £400-440mln for the year to the end of September, in line with current market forecasts.
The absence of a profit warning, which had been predicted by a handful of City analysts in the run-up to the third-quarter numbers, sent shares flying 3.4% to 1,070p in early deals on Thursday.
City broker Liberum said the results were “encouraging overall”.
Revenue per seat edged 0.7% higher in the three months to the end of June, while total revenue jumped by 11.4% to £1.76bn as passenger numbers climbed by 2mln to over 26mln.
The growth came despite tough comparatives and softer demand, with performance boosted by the later Easter this year and by competitors reducing the number of flights on certain routes.
Coupled with the top-line rise, cost per seat fell by 4.0% in the quarter, helped by reduced strike action and subsequent delays compared to the same period of 2018.
Good H2 visibility
Looking ahead, revenue per seat in the second half is still seen slightly lower, although Liberum's number crunchers reckon this is “suitably conservative” in the current environment.
“easyJet's third quarter performance was robust and despite the tougher macroeconomic conditions was in line with expectations,” said chief executive Johan Lundgren.
“With second half forward bookings at 78% we have better visibility on the second half and expect to deliver a profit before tax of between £400mln and £440mln, in line with market expectations.”
Capacity growth to moderate
“Curiously, the market probably likes the fact easyJet plans to grow capacity at the lower end of historic trends in 2020,” said Hargreaves Lansdown analyst Laith Khalaf.
“EasyJet and Ryanair have together more than doubled the number of passengers they’re flying in the last ten years, and continue to ramp up air traffic. That’s putting downward pressure on air fares, which is great for passengers, but not so great for profits.
“The odd thing was not only did its competitors’ share prices rise on the news, so did Ryanair’s, as investors cheered the reduced capacity in the market. That shows the market is sceptical of the aggressive growth strategy pursued by the two airlines, at least in the short term.”