easyJet at right altitude

EasyJet' s punchy advertising campaign is working. An extra 1.3m passengers flew with the budget carrier in the six months to March and its planes were almost 87 per cent full, offsetting higher fuel costs and trimming losses by £41m. Still, the share price reflects a lot of good news and, given numerous headwinds, we'd think twice before boarding at this altitude.

A bullish update in March had already guided investors to expect losses of £110m-£120m from £140m-£160m previously. Shifting capacity around to more profitable routes, raising ticket prices and increasing booking fees and bag charges paid off. Revenue per seat jumped 11.2 per cent at constant currency, and management has proved it has a tight grip on costs. Strip out fuel and cost per seat grew just 1.5 per cent; a mild winter and less industrial action saving £15m. And renegotiated ground handling contracts are up to 15 per cent cheaper, too. Still, growth will slow in the second half - "low to mid single" digits, the company says - and expect an extra £145m of fuel and currency costs. Economic hardship in Europe, higher airport charges, especially in Spain, and air passenger duty increases in the UK won't help, either.

Broker Investec expects full-year adjusted pre-tax profit of £260m and adjusted EPS of 44.1p (from £248m and 52p in 2011).

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