Investors in airlines are often sensitive to any perceived lag between passenger and capacity growth. This was a key cause of the significant slide in easyJet’s (EZJ) share price following a trading update. While the number of passengers carried increased by 8.6 per cent, this did not keep pace with a 10.3 per cent increase in capacity, leading to a 1.4 percentage point decline in load factor to 91.5 per cent.
Strikes at British Airways and Ryanair (RYA) were to the benefit of easyJet in its second half. This, along with “self-help initiatives” to drive passenger yield, mean that this year's headline pre-tax profit is expected to be between £420m and £430m, towards the upper end of previous guidance of between £400m and £440m. Total revenue per seat at constant currency for the second half is expected to increase by around 0.8 per cent, better than management’s previous assessment that it would be “slightly down”, due in part to the strike action disruption at competitors.
The increase in capacity also contributed to an increase in total headline cost for the full year, expected to be up around 12 per cent, with higher fuel costs at around £1.42bn and adverse foreign exchange movements also impacting that figure. Excluding fuel, cost per seat at constant currency is expected to fall by around 0.8 per cent, despite the impact of storms and technical issues at Gatwick airport.