EasyJet narrows FY first-half loss, expects big volcano impact

EasyJet narrowed its net loss for its fiscal year first half ended March 31 to £58.9 million ($87.9 million), a 31.4% improvement over an £85.9 million deficit in the year-ago period, but lowered its profit expectations for the full year ending Sept. 30 owing to volcanic ash-related airspace closures.

It now estimates 2009-10 pre-tax profit in the range of £100-£150 million, down from its initial estimate of £175-£200 million. Disruptions caused by the airspace closures are estimated to have cost it £50-£75 million in lost revenue and added expenses. The impact is composed of £20 million in lost revenue, £10 million in additional costs such as wet-leasing aircraft for extra flights to repatriate stranded passengers and £20-£45 million in customer compensation costs.

The total cost estimate includes both the extended April airspace closure and later disruptions that occurred through May 10. Continuing disruptions could raise the negative financial impact higher. To date, easyJet has cancelled 6,512 flights affecting 850,000 passengers.

Fiscal first-half revenue lifted 13.3% year-over-year to £1.17 billion including an 11.4% rise in passenger revenue to £912.4 million and a 20.9% increase in ancillary revenue to £258.3 million. On a per-seat basis, total revenue grew 5.1% to £46.3. The carrier said the six-month result represented "a good performance against a difficult backdrop...driven by the strength of easyJet's network, good route management and growth in ancillary revenues."

Total operating expenses heightened 7.5% to £1.25 billion but decreased by 0.4% on a per-seat basis to £49.47. Operating loss was £66.5 million, a 42.4% improvement from the £115.5 million operating loss last year. Passengers carried grew 10.6% to 21.5 million with 54% of passengers now originating outside the UK, an increase of 4 points compared to the prior-year period. Load factor improved 2.1 points to 85%. Capacity measured in seats flown increased 7.9% to 25.3 million.

At the end of the reporting period, the LCC's fleet comprised 189 aircraft, eight more than a year earlier. It will grow to 192 by the end of the current fiscal year. Eight aircraft will be added in each of the next two fiscal years.

"EasyJet will deliver substantial profit growth in [FY2009-10] 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," outgoing CEO Andy Harrison said. "We expect to grow our passenger numbers by around 10% and increase both yield and load factor."