Brexit reassurance fails to quell fears in travel sector
Reassurance from budget carrier easyJet that Brexit will not impact its schedules has failed to soothe the sector, according to brokers.
In a trading update today the carrier, which flies more than 60 routes from Manchester Airport, and almost 30 from Liverpool John Lennon Airport, easyJet chief executive Johan Lundgren said: “Now that the EU Parliament has passed its air connectivity legislation and together with the UK’s confirmation that it will reciprocate, means that whatever happens, we’ll be flying as usual.”
However, the update warned: “Whilst easyJet will deliver H1 results in line with expectations, macroeconomic uncertainty and many unanswered questions surrounding Brexit are together driving weaker customer demand in the market, such that we are seeing increasing softness in ticket yields in the UK and across Europe. Given this uncertainty our outlook for H2 is now more cautious.”
Russ Mould, investment director at Manchester investment platform AJ Bell, said: “EasyJet’s warning about softer ticket prices has sent shockwaves across the airline industry, adding to problems already voiced by tour operators and suggesting that 2019 could be a washout for the travel sector.”
He added: “People have been worried about the impact of Brexit on the aviation sector and there is lots of chatter that individuals are holding off from booking flights and holidays.
“If you’re going to hand over a large sum of money for a trip abroad, you want to be reassured that the flight will actually happen and will take off as scheduled. At the moment travellers don’t seem to have that reassurance.
“EasyJet insists that it will be ‘flying as usual’ whatever happens with Brexit, however these positive words may not be enough to solve its problems.
“The airline, alongside its peers, is also battling higher fuel bills and excess capacity in parts of the world, including Europe.
“Running an airline is a tough job as there are often many factors outside of management control.
“Fuel can be forward-bought but ultimately management are still at the mercy of oil price movements. The weather is another unpredictable factor and it is now clear that Brexit uncertainty has been added to the list.”
Today’s update from easyJet for the six months to March 31, confirmed it expects to deliver a first half performance in line with the guidance given in the first quarter 2019 trading statement on January 22, with an expected first half headline loss before tax of around £275m, in line with the seasonal nature of bookings.
Total first half revenue is expected to grow by around 7.3% to about £2.34bn with seat capacity increasing by approximately 14.5% to circa 46.2 million as easyJet continues to strengthen its position in key markets, as well as completing the annualisation of its flying at Berlin Tegel airport.
Revenue per seat at constant currency is expected to have declined by around 7.4%, in line with previous guidance of a mid to high single digit decline for the half.
Total headline cost in the first half is expected to increase by around 18.8% due to increased capacity, higher fuel unit costs and a modest increase in cost per seat, excluding fuel.
