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easyJet: solid result but future headwinds

The low-cost giant is negotiating the airline industry’s problems well, but there may be problems on the horizon.

easyJet says its summer 2019 bookings are a little ahead of last year’s and that the company earned 41% more profit before tax for its last financial year. On this buoyant news it has also announced an order for 17 more Airbus A320neos, bringing its total neo orders to 147, ATW reports.

Uncertainty about how Brexit will affect air transport has not yet affected the UK-based low-cost carrier, as its profit for the year ending September 30 rose to £578 million (€649 million).

Excluding the impact of its operations at Berlin Tegel Airport, the carrier’s profits increased by 69% to £690 million. Revenues grew 16.8% to £5.9 billion, while revenue per seat was up 6.4% to £61.94.

The carrier says that forward bookings for the first half of 2019 are “solid” at 50%, with capacity expected to grow around 15% during H1 and 10% for the full year.

Passenger numbers for the year grew to 88.5 million, up 10.2%, with a load factor of 92.9%, a slight rise on 92.6% the previous year, a statistic easyJet says was intensified by its expansion into Tegel.

These are both records for the airline, stresses chief executive Johan Lundgren.

“The integration of new operations at Tegel has also progressed well and our brand consideration in Berlin has grown strongly,” he said in a statement.

“Our strategy continues to ensure we are well positioned for the future. We have made considerable progress on our new initiatives in holidays, business and loyalty, which will enable us to grow profitably. While disruption continues to be a major challenge for the industry, we are investing in resilience to help to mitigate the impact on our customers.”

Brexit plans
As easyJet prepares for the UK’s imminent withdrawal from the European Union, it is operating via airlines in Austria and Switzerland as well as the UK to enable ongoing flights in Europe.

It also says it is close to achieving majority European Economic Area ownership, which currently stands at 47%.

However, for the next financial year fuel is expected to add further weight to costs, despite what the airline says is its solid fuel hedging position.

Headwinds coming
It was a “strong year for easyJet”, Daniel Roeska, an industry analyst at Bernstein, writes in a research note. “However, the outlook for full year 2019 continues to look challenging with increasing fuel headwinds, flat ex-fuel unit costs and pressure on first half yields from high sector capacity growth rates as well as accounting and one-off impacts.”

Analysts agree that the company has benefited from troubles suffered by rivals such as Ryanair, but this advantage is starting to fade as general uncertainty over fuel costs, currency and strikes persist.

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