easyJet warns of economic headwinds

AP News
Posted: Nov 15, 2011 4:17 AM
easyJet warns of economic headwinds

Budget airline easyJet PLC reported an 86 percent increase in full-year profit but warned Tuesday of significant economic headwinds in the current year.

Profit after tax rose to 225 million pounds ($358 million) in the year to end-September, compared to 121 million pounds a year earlier. Revenue was 16 percent higher at 3.45 billion pounds.

As announced in September, the airline plans a special dividend of 150 million pounds, plus the 10.5 pence per share dividend, equal to 20 percent of basic earnings per share. In total, shareholders are due 195 million pounds.

Gert Zonneveld, analyst at Panmure Gordon & Co., said it was "doubtful whether revenue increases can fully offset anticipated cost increases in the current year."

"Over the medium term, however, the outlook continues to be highly attractive in our view," Zonneveld said. He added that easyJet may benefit from International Airlines Group's planned takeover of BMI, which is expected to lead to a decrease in BMI's European services.

The carrier cautioned that it has felt the economic squeeze, with holiday bookings between June and August down 4 percent year-on-year. It added that weak consumer confidence makes it more difficult to pass on higher costs for fuel and taxes to passengers.

The carrier's shares were down 1.6 percent at 360 pence on the London Stock Exchange.

Following the lead of its larger rival, Ryanair, easyJet said it would begin a trial of selling assigned seats early next year.

That may be most attractive to business travelers, which easyJet has been eager to attract. The company said it had 1 million more business passengers during the year, to a total of 9.5 million.

The airline's management faces continuing criticism from Stelios Haji-Ioannou, the company's founder and biggest shareholder with a 26 percent stake; he and his family have a combined 38 percent share.

Haji-Ioannou recently wrote to easyJet's chairman, Mike Rake, demanding that easyJet raise its dividend payout further, to 50 percent of earnings and allow shareholders to vote on all new orders for aircraft. If not, he said he would vote against the reappointment of the current board of directors.