EasyJet will not be the last airline to announce disappointing results this year
If they are to continue to fill their planes, airlines will have to woo passengers with ever cheaper fares
By B.R.
AFTER the results of Britain’s EU referendum were announced, European airlines’ shares plummeted. Some, such as Ryanair, Europe’s biggest budget carrier, talked about shifting their focus away from Britain. However, the continent's second biggest, easyJet, which is headquartered in Luton, insisted it was going nowhere.
The success of that strategy will depend on the terms of the aviation deal that Britain and the EU finally agree upon. But half of easyJet’s passengers do not fly either to or from the United Kingdom, so the airline will in any case need to retain a license to fly routes within the EU. It must therefore hope the European negotiators play ball.
Even before it deals with that problem, easyJet has another headache brought on by Brexit. On 21st July the carrier announced disappointing quarterly results. Although the number of passengers it flew increased by 900,000 to 20.2m in the third quarter of this year, compared with the same period 12 months earlier, growth has come at a cost. Between April and June, easyJet’s average revenue per seat fell to just £54 ($71), down 8.3% on the year before. Its costs also rose by £40m in the four weeks since the Brexit vote.
That is largely down to the effect that the Brexit vote has had on the pound, which has fallen 10% compared with pre-referendum levels. Sterling's slump has hit the carrier twice. First, it pushed up the cost of buying jet fuel, which is priced in dollars. And second, it made visiting the continent more expensive for Brits, tempering demand.
On top of everything, European airlines have had to deal with a litany of other woes, ranging from air-traffic control strikes in France to terrorist atrocities in Belgium, France and Egypt, and the attempted coup in Turkey. All of which suggests that easyJet will not be the last airline to feel the pain of market conditions this year. Lufthansa, for example, has already advised that its earnings will fall. Others will follow.
If they are to continue to fill their planes, Europe's airlines will have to woo passengers with ever cheaper fares. That is good news for flyers. For airlines’ sharelholders, less so.
