EasyJet profit fall after pairing outlook with IAG on EU exit

London / Bloomberg

EasyJet Plc joined British Airways owner IAG SA in warning that a drop in travel demand and a slump in the value of sterling following the UK vote to quit the European Union will hurt earnings for the rest of the summer.
Shares of Luton, England-based EasyJet fell as much as 19 percent and were priced 18 percent lower at 1,071 pence as of 10:14 a.m. in London. Europe’s second-biggest discount carrier closed down 14 percent on Friday in the wake of the referendum result, after earlier declining 24 percent.
The historic decision to quit the EU is likely to cause “economic and consumer uncertainty,” and as a result revenue per seat in the second half ending Sept. 30 is set to drop by “at least a mid-single digit percentage” from a year earlier, EasyJet said in a statement onMonday.
A slide in the pound’s value against the dollar, euro and Swiss franc in the run up to the vote and its plunge on Friday will also raise expenses by about 25 million pounds ($33 million) for the year, EasyJet said, adding that it will accelerate existing cost-cutting plans.

IAG Extends Slide
EasyJet’s comments come after IAG said that gains in full-year operating profit will fall short of the 70 percent surge posted in 2015 as the Brexit vote extends a slide in demand that began in the run up to the poll. Earnings growth should still be “significant,” it said.
IAG shares fell as much as 11 percent today after a 23 percent collapse on Friday, before trading 9.2 percent lower. The group’s BA unit is most exposed to any impact that an EU could exit has on London’s standing as a business center.
Ryanair Holdings Plc, which while based in Dublin counts Britain as its biggest market, and UK regional carrier Flybe Group Plc, both of which have yet to update investors, fell as much as 9.7 percent and 13 percent respectively.
Among continental carriers, Air France-KLM Group, Europe’s biggest airline by passenger traffic, traded as much as 5.4 percent lower and Deutsche Lufthansa AG, the No. 3, slipped as much as 6 percent. EasyJet also said that French air traffic control strikes and adverse weather weighed on sales in the third quarter, which ends on Thursday, as seats had to be reallocated to passengers from more than 700 flights cancelled in June alone. Those berths weren’t then available for lucrative last-minute bookings.
Pretax profit will probably be cut by 28 million pounds for the quarter, with revenue per seat dropping 8.6 percent, EasyJet said. That compares with a slide of about 7 percent that the carrier indicated at its half-year results.