EasyJet warns of 105m pound profit slump following weaker pound, raised fuel prices

Company - Himanshu Gill - Jan 24,2017

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easyjet warns of 105m pound profit slump following weaker pound raised fuel prices

British low-cost airline EasyJet has said that weaker pound and increasing fuel prices would hit its profit by a larger than expected amount of 105 million pounds ($131 million) this year.

This forecast has come after the company reported a bullish trading over the final three months of 2016. Carolyn McCall, chief executive of EasyJet, said that the company had a solid first quarter with revenue, cost and passenger numbers in-line with the expectations, despite tough pricing and operating environment.

Total revenue in the last quarter increased by 7.2 percent to 997 million pounds, which EasyJet said was majorly because of the increase in passengers carried through the period. The airline said it had raised passenger capacity by 8.6 percent, and passenger numbers had increased by 8.3 percent to 17.4 million.

EasyJet pays in dollars for fuel, which makes it more expensive when the pound is weaker. The company revealed that a weak pound and the impact of fuel combined are worse by 35 million pounds than previously anticipated.

After the announcement, EasyJet’s shares slumped by more than 7 percent in early trading. The company had previously warned of a dip revenues due to the fall in the currency.

EasyJet’s revenue per seat fell by 8.2 percent at constant currency to 51.64 pounds per seat, although it was slightly better than the company had previously expected.

Easyjet is in the process of setting up new operations in the European mainland, for being ready to operate in the post-Brexit EU. It said setting up a new European entity would cost it over 10 million pounds.

The airline, however, is planning to maintain its London listing and Luton headquarters. It has bases at 11 UK airports and flies over 800 routes on its network across Europe, the Middle East and North Africa.