EasyJet fares to gain in winter, buoyed by collapse of ‘carriers’

Bloomberg

EasyJet Plc said its fares are set to gain this winter, buoyed by the collapse of carriers including UK-based Monarch Airlines Ltd. and capacity cuts at main European rival Ryanair Holdings Plc.
The demise of Monarch and Germany’s Air Berlin Plc, a bankruptcy filing at Italy’s Alitalia SpA and Ryanair’s move to scrap part of its timetable amid a staffing crisis are “all very good news for EasyJet,” Chief Executive Officer Carolyn McCall said.
EasyJet shares rose the most since June 2016 after the Luton, England-based carrier said that revenue per seat—a measure of prices—should now increase by a low to mid-single digit percentage in the fiscal first half through March, excluding the impact of some Air Berlin routes takeover.
McCall, who stands down as chief before the end of the year, said the shakeout of Europe’s airlines has benefited EasyJet structurally and given Europe’s second-biggest discount airline “positive momentum” going into fiscal 2018. The retreat of the carrier’s rivals comes as a boost after the weaker pound weighed on last year’s earnings.
The failure of Monarch on October 2 eliminated capacity at EasyJet’s Luton and Gatwick hubs, and while the defunct company’s operating slots are set to be reallocated they’ll no longer be concentrated at a single rival. “The first half is looking extremely positive and that is as a direct result of the dislocations in the market,” McCall said. Increases in the price of oil are likely to result in further pressures, she added, so that “the strong will get stronger and the weak will get weaker.” EasyJet itself is “very well hedged.”
The shares advanced as much as 6.7 percent, the biggest gain since June 28, 2016, and were trading 6 percent higher at 1,355 pence as of 8:49 am in London, taking gains this year to 34 percent and valuing the company at $7.1 billion. EasyJet’s pretax profit for the year ended on Sepember 30 fell 17 percent to 408 million pounds, according to a statement, in line with guidance given in October, hurt by the slide in sterling and a glut of seating in European markets.
The company said it’s too early to provide guidance for the second half, while estimating that taking over Air Berlin plane leases and slots at the German capital’s Tegel airport will incur losses of about 60 million pounds in fiscal 2018, plus 100 million in one-off expenses. The acquisition should close next month, it said.