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London / AFP
British low-cost airline EasyJet warned on Tuesday it faced further financial turbulence from a Brexit-driven slump in the pound after terror attacks and labour disputes took their toll on annual profits.
Pre-tax profit tumbled by 28 percent to £495 million ($618 million, 574 million euros) in the year to September 30 compared with 2014-15 “mainly due to the decline in revenue and foreign exchange impact”, EasyJet said in an earnings statement.
It added that currency fluctuations would cost it around £90 million during the current financial year, with £70 million in the first half. EasyJet said it planned cost savings but gave no firm details.
“EasyJet achieved a resilient performance in 2016, in the face of significant challenges including a series of external events and foreign exchange headwinds,” group chief executive Carolyn McCall said in the statement.
EasyJet has also been hit over the past year by industrial action and unrest in key markets Egypt and Turkey.
Markets had expected the latest financial results after EasyJet posted a profit warning in October.
In morning deals on Tuesday, its share price was up 1.55 percent on London’s rising benchmark FTSE 100 index.
The pound has meanwhile tumbled following Britain’s shock June 23 vote in favour of leaving the European Union, striking 31-year dollar lows and 7.5-year troughs against the euro.
The collapsing value of the pound weighs on EasyJet’s performance because it makes dollar-priced jet fuel more expensive, ramping up the cost of running aircraft.
Revenue is also hit when euros earned from tickets sold abroad are converted back into sterling.
“EasyJet is contending with a toxic mix of aggressive price cuts by competitors, reduced demand from terror attacks across Europe, North Africa and Turkey, higher costs for UK travellers post-Brexit and lots of disruption from strikes and adverse weather,” noted Neil Wilson, markets analyst at ETX Capital.
“It’s been a tough year for EasyJet shareholders. The airline was among the worst affected by the Brexit vote and the stock is still down more than 30 percent from its pre-referendum levels,” he added.
Since the referendum, EasyJet has applied for a European Union licence to keep flying throughout the bloc — becoming the first carrier to activate a contingency plan.
“This will secure the flying rights of the 30 percent of our network that remains wholly within and between EU states, excluding the UK,” it said in Tuesday’s statement.
Sterling has won back some ground in November after London’s High Court ruled that the government must seek parliamentary approval before triggering Brexit.
British Prime Minister Theresa May has said she will formally trigger the two-year divorce process by the end of March 2017 but Brussels and London face gruelling negotiations on a future trade deal.
EasyJet plans overhaul as Brexit currency losses to double
Bloomberg
EasyJet Plc said it’s working to streamline operations as the slump in the pound after Britain’s decision to quit the European Union is set to weigh more on earnings next year.
The June 23 Brexit vote extended a slide in the pound that has inflated EasyJet’s euro- and dollar-denominated costs and which may discourage Britons from travelling abroad. At the same time terror attacks from France to Turkey have hurt demand and fares amid a capacity glut encouraged by the lower oil price.
EasyJet cut its 12-month dividend payout by 2.5 percent to 53.8 pence as a result of the profit decline, and didn’t provide an estimate for fiscal 2017 earnings. While the company will book unspecified charges for the restructuring plan, details of which have yet to be disclosed, it said the measures should begin to bring down costs six to nine months after being implemented.