Ash cloud hits easyJet profits

LOW COST airline easyJet has warned that the disruption caused by the volcanic ash fallout across Europe is set to cost the business between £50-£75m.

As a result, the airline said today that it had had to revise this year’s profit estimates from £175-£200m to £100-£150m based on current exchange rates and fuel prices.

The disruption caused by the ash cloud grounded all flights in the UK for six days last month bringing travel chaos to the continent. Further eruptions continue to cause disruption and the situation is likely to continue for some time to come.

Announcing its interim results, the airline – which operates services out of Birmingham International Airport, said total revenue per seat during the six months grew by 5.1%, driven by good consumer demand, ancillary revenue growth and a 1.4% increase in sector length.

Nevertheless, the airline still recorded an underlying pre-tax loss of £78.7m, although the firm said this was slightly better than expected.

The £51.1m reduction in underlying pre-tax loss compared to the first half  last year was driven by a unit fuel cost decrease equivalent to £80m, partially offset by lower interest income of £11m and £25m of lost business due to the severe winter weather.

Operating cost per seat, excluding fuel and currency variations, increased by 4.3% for the half year mainly because of the impact of the snow disruption in December and January. Excluding this, operating cost per seat rose by 1.9%.

The airline said it had made good progress on cost reduction targets with initiatives in place to cover 70% of the £190m per annum target.

Positive cash flow increased by £283m to £1,358m, excluding restricted cash of £101m. This, together with uncommitted resources and spare cash, would enable the airline to fund future aircraft deliveries for at least the next 18 months.

Capacity, measured in seats flown, grew by 7.9%. Passenger numbers grew by 10.6% to 21.5 million with 54% of passengers now originating outside the UK, an increase of 4 percentage points compared to the corresponding period last year.

easyJet also succeeded in growing its market share from 6.5% to 7.6% of short haul aviation over the past 12 months.

Andy Harrison, easyJet chief executive, said: “easyJet will deliver substantial profit growth in 2010 through the worst recession in 70 years and even after absorbing snow and volcanic ash related disruption costs from the worst snowfall in 30 years and an unprecedented five day closure of much of European airspace.

“We expect to grow our passenger numbers by around 10% and increase both yield and load factor. This is a remarkable performance based on strong European-wide consumer demand for our low cost network of primary routes which offers the lowest prices to the most convenient airports.”
 

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