easyJet shares plunge...again

[Zulu]

Budget airline easyJet Plc lost over a fifth of its market value on Monday as it joined rival Ryanair in giving a bleak outlook amid rising fuel costs and a ticket price war.

EasyJet shares were down 21.17 percent at 158-1/4 pence at 0736 GMT.

EasyJet's latest stock-market woes come just a month after its shares plunged when it warned that a price war with rivals such as Ryanair would keep fares under pressure.

Question - why don't easy hedge fuel, and why not charge a surcharge?

NB: Just three months ago, the share price was nearly 350p - that´s a 55% fall. Is the stockmarket being too harsh?

[Notso Fantastic]

They don't need to surcharge- if necessary they can just make an adjustment to their 'floating fares' (fares set according to route and load factor and continually adjusting themselves). Why they don't hedge? I would guess it costs money. Sometimes you win and sometimes you lose. It's like insurance- look at the industry that has built up around that- all living off insurance premiums. Maybe we'd all be better off if none of us insures anything at all. If an industry lives off hedging premiums, maybe in the long run if you never hedge, you've unloaded yourself of that expense.

[Voeni]

first thing: don't rely on stock prices!

i still believe that easyjet has a distinct advantage over ryanair as they serve the big airports which might turn out to be a bigger advantage once traffic numbers increase. so why not buy easyjet now?

[BEagle]

Saw Mo'L on CNN recently. Whatever people might think about him, he gave a very clear and firm description of his airline's way of avoiding the need for surcharges.

Bit arrogant to think that he still has a cat in hell's chance of overturning the Charleroi matter though.

[lamina]

PE ratio still in the clouds, so it is possible to drop even further in the medium term (I doubt it in the short term though). I suspect that Websters coments regarding over capacity in the sector have woken investors up to the fact that ezj and rya are the two biggest drivers of over capacity and that the ezj ambitious orderbook could cost it dear in the long term.

Its just a good job share options are not a replacement for the ezj loyalty bonus.:ooh: :ooh:

[AJ]

Knee-jerk reactions in many cases. When you invest in airlines (I wouldn't personally) you've done your research into how the airline industry works, and you know what is likely to yield a reasonable return over the LONG TERM.

As many have already commented, many low-cost airlines won't make it through the next year or two. However, if I had to put my money somewhere, I'd be willing to bet on easyJet and Ryanair being around in 5 years' time. They've built up the size, brand recognition and have sussed-out the main markets. Looking at the broad (and long-term) picture, I reckon they both have a future.

I can't say the same for the other low-cost carriers, many of whom don't publish results and are likely to be losing large amounts of money.

In short, many investors don't know an awful lot about the industry, or the airline companies they invest in. Those that avoid investing in airlines altogether are probably more on the ball in any case. :}

[newswatcher]

first thing: don't rely on stock prices What exactly did you mean? :confused:

[PAXboy]

Zulu: Is the stockmarket being too harsh?
Only if you think that they are there to invest in companies to ensure the companies long term survival! The stock market is a simple open gambling pen. Everyone hopes to make money by taking best on the future. When aspects of the future change, they change their bets and that is what has happened today.

Another key factor is that the young men and women now making the bets have not experienced a fuel crisis before!

Lastly, I reckon that EZY is being more open and honest than some. They have said what the risk is and so their price falls. MoL has the identical risk and he will say nothing unless forced to and his price will not go down. At least, not today.

;)

[Right Way Up]

Easyjet do fuel hedge!!

[FlapsOne]

.........and share options are not replacing the loyalty bonus!

[touch&go]

I was having a conversation in the hotel bar last night and we were discussing what the market place would look like in 5 years time or so and one thing what we all thought was that BA would snap up Easyjet when the price is low, not now but in a few years time, I know that I’ll get shot down for this, but I put a small bet on it if I could.

[Nil further]

Touch & Go


Thats the best laugh ive had for months .

NF

[easy]

What's my seniority number going to be???:cool: :cool: :cool:

[lamina]

3501 ish:D :D :D

[stormin norman]

News from the front (Mike Szucs) is that all is not well at easy.
Anyone betting on a change of leadership?

[FlapsOne]

Oh God............................I do hope so! The very top please!

[blackbox]

I got out of this one, when it hit £3.80 in january!

[NOT ORANGE]

Im holding on to my options as Ray said that the shares will be going towards £10 a share after the Go takeover and I know with that 3 day week of his he'll turn things round soon.And what a shame it would be to lose such a charismatic leader from the industry.

[Norman Stanley Fletcher]

There are a lot of airlines in Europe and America who would just love to be predicting a £50m+ profit pre-tax for the year in the current conditions. I am backing easyJet all the way to make it.

[MerchantVenturer]

Anyone betting on a change of leadership?

Now, isn't there a lady who has recently taken a back seat from her position as number one in London's Olympic bid?

I wonder if she is getting bored? :)

[Agaricus bisporus]

From the FT today;







EasyJet caught in a City headwind
By Mark Odell
Published: June 8 2004 5:00 | Last Updated: June 8 2004 5:00

The share tumble that greeted EasyJet's results last month left Ray Webster, the airline's chief executive, shell-shocked. The furious reaction from investors and analysts following a second warning on profits yesterday may well leave him wondering how secure his job is.


The anger and dismay was palpable around the City yesterday after the airline disclosed it had misread the impact of the ongoing price war in the sector and the rising cost of fuel.

To make matters worse, investors and shareholders trying to get further clarification from the company about the trading update were told Mr Webster was in Singapore at an annual airline trade association event. Meanwhile, Chris Walton, the finance director, was in meetings.

The reaction was immediate, sending the shares down by about 20 per cent from 200¾p to 163½p, leaving long-term holders of EasyJet shares with a stake whose value has halved in a month.

This reaction represented more than just a correction as analysts slashed their profits forecasts for this year and next in half. It was also a signal to management that they may have pushed the patience of the City too far.

"This announcement will cause further significant damage to EasyJet's management credibility," said one large shareholder, who listed among the other concerns an overpayment for Go, the low-cost airline bought from British Airways, and mismanagement of capacity.

"I see no positive news on the horizon so it is likely that for the next nine to 12 months the shares will trade below their net asset value, which I estimate is 200p, reflecting the significant damage to their credibility," he added.

Another analyst, who has been highly supportive of EasyJet in the past, was equally angry as he had to face clients demanding to know why he had not seen it coming after the airline had warned of pressure on yields.

"Management actually laughed at us when we suggested second-half yields might be down by 5 per cent just four weeks ago. Now they are telling us it is 10 per cent and are not discounting a 15 per cent fall in the fourth quarter. I am very upset," he said.

He added Stelios Haji-Ioannou, the founder and single largest shareholder of EasyJet, should consider changes.

How the company steered analysts in the past few weeks - and questions over whether analysts should have reacted more robustly than downgrading their forecasts by just 15 per cent after the interims - is a valid concern among investors.

The belated reaction follows repeated warnings this year from Ryanair, the market leader in the low-cost sector with EasyJet.

Michael O'Leary, the Irish carrier's chief executive not known for mincing his words, repeated his warning at the time of its results last week.

He said the market should prepare for a bloodbath as the two dominant players take on the mounting competition from droves of upstarts across Europe.

"In contrast to the usual outspoken Mr O'Leary who has been warning us all for some time of the consequences of increased competition, all we got from EasyJet at the interims was of a modest decline in yield. Now all of a sudden it's much more than modest," the shareholder said.

In a sign of how far relations have deteriorated, one of the the most positive comments yesterday came from Chris Avery, airline analyst at JP Morgan.

In a research note, which saw him cut the forecast for this year from a pre-tax profit of £98.3m to £52.1m, he wrote: "The stock has fallen a long way [as have earnings estimates], but we believe that the company is building long-term shareholder value at the expense of shorter-term profitability.

"We see few fresh catalysts, hence it might be better this summer to benefit from EasyJet's business model as a passenger." Investors may want more than a cheap flight to address their concerns.



Time to call Barbara!

[fiftyfour]

Touch and Go. I doubt that BA could buy Easyjet. They are only just breaking even at the moment, they have £4 billion of debt, their pension fund has a £1 billion deficit, and their credit rating is so low in the city that their bonds are 'junk' status. They are trying to survive - not expand.
Most of those who have been in aviation for more than 10 years have seen this before. Easyjet looks just like Air Europe to me. i.e. big ideas, lots of aircraft on order, a recession looming and no real idea of where the passengers will come from to pay all the bills that are mounting fast.

[MerchantVenturer]

The City is clearly not best pleased with easyJet at present and may well demand a sacrifice. If so, the CEO is often the person pushed forward to make gory contact with the ceremonial sword.

In that event I wonder whether Barbara Cassani would be in the frame (if of course she was interested), and if so how the City, the airline and the aviation industry would view her appointment.

Anyone got any thoughts on any or all of these musings?

[ojs]

Unusual, fiftyfour: you're right on the mark in some respects and completely wrong in others!..

(a) I'd hardly call an operating profit of £405M for last year "only just breaking even"!..

(b) BA's rating WAS junk but it's now BB+ (S&P) or Ba1( Moody's) as a cursory google to http://quote.bloomberg.com/apps/news?pid=email_us&refer=home&sid=avfWZeA9zsFA would have shown you.

(c) BA's not trying to survive. It will survive (cash reserves in excess of 1 billion will see to that).

But!.

(d) You're quite right: BA won't be buying EZY in five/ten years' time. It would be quite wrong as a strategy.

[Ace Rimmer]

The story that was doing the rounds awhile back was that when the Easy Go merger happened Stelios wanted Babs in at No2 (COO or something) but she said "it's top dog or nothing call me when Ray retires/leaves" or words to that effect so read in to that what you like.

[Rocket Ron]

... nice story Ace Rimmer but sadly untrue. Cassani has "been there, done that" and has no desire to return to the airline industry.

[Brakes to Park]

Rocket Ron , in fact Babs told Stelios to get back to her when Ray retires.Not really we want more Go castoffs though , the aircraft are bad enough.

[Ace Rimmer]

Rocket Ron you might think that. but airline execs have a habit of making more comebacks than Sinatra.

Off topic but take for example the case of Don Burr - remember him? He started People Express you'd think he'd have the sense to stay far away from avaition having had that experience and indeed he did even retired from business...until now that is. He's starting up an uber air taxi/airline hybrid operation and who's his partner in crime? Another retiree, one Bob Crandall. remember him? Used to run an airline out of Dallas.

See there is a Rimmerian theroy, "Aviation is rather like the Hotel California" In short don't rule it out, Babs could be back

[Diabolus]

His Hampstead Townhouse is not even finished yet

[fiftyfour]

OJS,

BA are doing well, better than I thought. My observation was wrong. They have come a long way. Mind you, £4 billion is an huge huge amount of money to owe.
Hope I'm wrong about Easyjet, but doubt it.

[PAXboy]

Now, isn't there a lady who has recently taken a back seat from her position as number one in London's Olympic bid? and all the other comments about Ms Cassani ...

I think that you will find that she is No2 in the bid for purposes of publicity only. They have put coe in as a British figurehead for a British bid, not to mention that he has a political title and may be expected to swing some deals with them. You can bet your sweet @$$ that Ms B. is in the driving seat. :)

--------------------
"I tell you, we are here on Earth to fart around, and don't let anybody tell you any different." Kurt Vonnegut, Jr.

[paperpusher]

Rocket Ron, how you doin'? about BC why not,? proven track record, the City love her, had 100% backing from ALL the staff, and she loves a challenge. It would be a turn up wouldn't it
Cheers PP

[Rocket Ron]

Hi pp, still hanging in there eh?

Much as I'd like to see Babs back in the driving seat, I just think it's wishful thinking - GO was her baby - running easyJet would be like bringing up somebody else's child.

The question is will Webster jump before he's pushed?

[paperpusher]

Rocket, will he jump or be pushed.....who cares?
Onwards and Upwards.
Cheers PP