Low-cost airline easyJet displays operational resilience, and investors are getting onboard.
Third-quarter trading update
- Revenue up 11.4% to £1.76 billion
- Passenger numbers up 8% to 26.4 million
- Total revenue per seat up 0.7% at constant currency
- Headline cost per seat excluding fuel at constant currency fell 4%
Chief executive Johan Lundgren said:
"Quarterly performance was robust and despite the tougher macroeconomic conditions was in line with expectations. Revenue increased by over 11%. Our customers experienced significantly reduced cancellations and long delays largely as a result of our investment in operational resilience, which also contributed significantly to driving down cost per seat ex fuel at constant currency by 4%."
Launched in 1995 and floated on the London Stock Exchange in 2000, today short-haul European airline easyJet (LSE:EZJ) flies over 80 million passengers annually. It operates over 300 Airbus aircraft, 70% of which are owned and the balance leased. Among its key priorities is to be number one or two in primary airports.
For a round-up of the third-quarter trading statement, please click here.
Factors outside of management's control, such as fuel costs, currency fluctuations and the weather can hinder financial performance. Company action to try and mitigate such factors is a feature across the industry.
Oversupply or excess capacity in several of its markets continues to make for a highly competitive environment. easyJet's founding low-cost business model has arguably given it first-mover advantage, with some rivals having already failed and others potentially not surviving longer term. But this industry is highly cyclical, and an economic downturn remains a threat.
Geopolitical tensions and their impact on the oil price are an overhang, too. Brexit, despite management preparations, and broader European economic sentiment, also cast a shadow. For investors, a forecast dividend yield of over 4% and covered nearly twice by earnings, we believe, should help compensate for likely required patience.
- Trading still in line with expectations
- Upgrading aircraft fleet could cut cost per seat by 20%
- Became largest short haul operator in Berlin market in 2017
- Profit expected to fall this year
- Lots of factors outside its control
- Despite group preparations, Brexit creates uncertainty
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