Business

Easyjet warns of £90m currency hit

Easyjet plane in Berlin Image copyright Getty Images

Easyjet has warned that the weakened pound will cost it £90m in its current financial year.

That is more than double its original estimate made in July, when it warned of a £40m hit.

Jet fuel is priced in dollars, so the falling pound has made it more expensive for Easyjet to run its aircraft.

Easyjet expects a profit of between $490m and £495m for its financial year, which ends on 30 September.

That would be down 28% on the £686m annual profit it made in 2015. It would also be the first fall in annual profits since 2009.

Shares closed down by nearly 7% to 933.5p.

"The current environment is tough for all airlines, but history shows that at times like this, the strongest airlines become stronger," said Carolyn McCall, Easyjet chief executive.

The problem for Easyjet is that although it has been flying passengers in record numbers, those passengers have been enjoying lower ticket prices.

Easyjet expects revenue per seat to be down 8.7% for the year and expects ticket prices to fall further in the coming months.

'Aggressive' discounts

"Average fares are coming down, which is good for customers. To a certain extent, there is a price war going on," said Robin Byde, airline analyst at Cantor.

"Passenger growth is very strong, cabins are very full. To do that, they've had to discount quite aggressively," he said.

Terror attacks in Europe, Turkey and Tunisia have also affected sales.

"We have been disproportionately affected by extraordinary events," said Ms McCall.


Image copyright AP

Easyjet says "extraordinary" events have cost it £125m up to the end of its third quarter (which ended on 30 June).

The airline says that it is particularly vulnerable to strikes in France, as almost two-thirds of its flights touch French airspace.


Business is likely to be tough for Easyjet over the coming months. Recent terror attacks might discourage some people from travelling and Easyjet says the pound's weakness will make foreign travel less affordable for UK tourists.

"Easytet is facing challenging times on a number of fronts, and it's one of the worst performing stocks in the FTSE 100 since the EU referendum," said George Salmon, an analyst at Hargreaves Lansdown.

"The competition is hotting up too. Other airlines are looking covetously at easyJet's market share, with pressure coming from both the budget players Wizz and Ryanair, and 'premium economy' offerings like Vueling," he said.

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