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EASYJET
THIRD QUARTER INTERIM MANAGEMENT STATEMENT
Highlights:
* Total passenger numbers up by 16% with continued strong growth in Gatwick and
mainland Europe in particular
* Total revenue per seat grew by 12% to £46.36 compared to the same period last
year
* Total revenue up 32% driven by strong ancillary performance and the
strengthening Euro
* Revenue and costs excluding fuel performing to expectations and over 50% of
the expected full year fuel cost increase of £185 million has been offset
* Capacity growth reduced significantly for the Winter 2008 / 2009 to around 4%
to 6% with flexibility to scale back further
Three months ending June 30th 2008 June 30th 2007 Change %
Passengers (m) 1 11.5 9.9 16
Seats (m) 13.8 11.7 18
Load factor (%) 2 83.5 84.5 (1) ppt
Total revenue (£m) 3 641 487 32
Passenger revenue (£m) 3 538 441 22
Ancillary revenue (£m) 3 103 46 124
Including checked bag charge
Total revenue per seat (£) 46.36 41.46 12
Passenger revenue per seat (£) 38.91 37.58 4
Ancillary revenue per seat (£) 7.45 3.87 93
Including checked bag charge
Total revenue per passenger (£) 55.74 49.19 13
Average operating aircraft 154.1 126.6 22
ASKs (bn) 14.8 11.7 26
RPKs (bn) 12.6 9.9 27
Average sector length (km) 1,069 993 8
Commentary:
Third Quarter revenue and network performance
Passenger numbers grew 16% in the quarter to 11.5 million. The majority of the
growth was focused around London Gatwick, France, Italy and Spain. Total non-UK
originating passengers increased by 25% in the quarter and UK originating
passengers grew by 9%.
Despite the timing of Easter which has had the effect of diluting yields, total
revenue per seat continued to grow strongly, up 12% to £46.36 in the quarter,
with passenger revenue up by 4% per seat. Ancillary revenue grew by 93% in the
quarter to £7.45 per seat, mainly driven by the introduction of the checked bag
charge from 1st October 2007. The checked bag charge increased to £5 per bag at
the end of March. A significant proportion of easyJet's passenger revenues are
Euro denominated and unit revenues have benefited from the strengthening of the
Euro. Total revenue trends on a constant currency basis have also improved as
shown in the table below.
% change vs F '07 Q1 F'08 Q2 F '08 Q3 F'08
Total revenue per seat 1% 16% 12%
and at constant currency -1% 9% 5%
easyJet now operates 356 routes from 20 bases and revenue performance is
encouraging across the network. London, especially Gatwick, continues to perform
well with particular strength on the former GB Airways sectors and on routes to
France and Italy. Overall, the UK regional bases are delivering good results
particularly at Newcastle and in our Scottish bases. Performance at Belfast
remains challenging as capacity has increased in the market, however
encouragingly easyJet's loads are ahead of the competition on key overlapping
routes. France and Italy are delivering strong revenue per seat improvement.
Madrid remains challenging however there has been recent improvement in revenue
per seat and easyJet's load factors continue to be above those of its
competitors.
Network development
Network expansion continues to focus on primary centres such as Milan Malpensa
and Paris Charles de Gaulle. At Milan Malpensa easyJet has recently introduced
its 11th aircraft, increased capacity substantially and by December 2008 easyJet
will have 15 aircraft based there.
Overall, capacity growth for the Winter 2008 / 2009 has been reduced and is
currently planned to be in the region of 4% to 6%. Flying at less profitable
times has been thinned and easyJet will reallocate capacity from weaker
performing bases towards higher value opportunities including Gatwick, France
and Italy. At Stansted, capacity will be reduced by 12% this winter and at the
beginning of June easyJet announced that the future of its base at Dortmund is
under review. In the current environment flexibility is vital and easyJet
continues to review its schedule and may make further adjustments both to
eliminate unprofitable flying and to seize any opportunities that may arise as
capacity exits the market.
Outlook
easyJet's underlying business continues to perform well and in line with
expectations. Second half total revenue per seat is expected to show mid teens
growth compared to the same period last year. Costs ex fuel, have in the second
half been under pressure from increased airport charges not least at Gatwick, a
decision easyJet is challenging through a judicial review process. easyJet will
continue to be relentless in its approach; reducing cost and increasing
efficiency.
Due to the rise in the oil price, easyJet's fuel costs have increased by around
£185 million for the full year and naturally this will drive a reduction in
margins. However, easyJet has offset over 50% of the increase in fuel through
revenue and cost performance and will deliver pre-tax profit before one-off
costs in the range of £110 million to £120 million, assuming an average
un-hedged fuel price of $1,280 per metric tonne for the second half of the
financial year. GB Airways is now integrated into easyJet's operating model and
one-off integration costs remain in line with the original guidance of £12
million.
Winter 2008 / 2009 will be challenging for the whole airline sector due to
higher fuel costs. easyJet currently has 28% of its 2009 fuel requirement hedged
at an average price of $1,265 per metric tonne.