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Thursday, October 6, 2022

Brexit-hit currency and terror attacks set to deepen easyJet losses

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Budget airline easyJet looks set to deepen half-year losses next week, as it grapples with Brexit-hit pound, costs linked to launching a new European base and drops in bookings to some cities following terrorist attacks. Analysts expect losses at the low-cost carrier to expand to around £210 million (€248m), in contrast to a £24 million (€28m) loss over the period last year – with the lion’s share of the blow coming from sterling’s weakness.

The half-year results are also expected to include a £10 million (€11.7m) hit for an air operation certificate. The group is in the midst of setting up a new operating company in mainland Europe and applying for a new licence to secure flying rights for 30% of its routes after Brexit. While Tuesday’s results could reveal a tough period for the firm, the airline will look to bounce back over the summer by capitalising on the trading woes of rival carriers, such as Alitalia and Air Berlin.

However, Damian Brewer, analyst at RBC Capital Markets, said the widening losses for the first half of the year will make it harder for the firm to hit full-year targets. He said: “We see first half profit-before tax deteriorating to a £210 million loss, potentially. “However, the concern to us is that to make the company outlook implied £360-£370 million full year profit before tax, a significant profit recovery will be required in the second half.”

EasyJet said in January that the weak pound was expected to cost it around £105 million (€124m) over its 2016/17 financial year, up from the £90 million (€106m) estimated in November, with fuel expenses also falling by less than expected.

It added on top of the extra £35 million (€41m) fuel and pound bill in the first quarter, it also saw a financial impact in the “low millions” from the deadly truck attack in Berlin on December 19, as bookings to the city dropped in the immediate aftermath.

Travel companies have seen demand to key tourist locations and capital cities wane following a number of terror incidents across the globe, including an attack in London which killed five people and left dozens of others injured on March 22.

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