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Late Easter helps revenues at easyJet to soar in third quarter

Boosted by a “significant benefit” from Easter, revenues for the three months ended 30 June jumped 16% year-on-year to £1.39bn

easyjet plane
easyJet carried 22.3mln passengers in the third quarter

The later timing of Easter this year helped revenues at budget airliner easyJet PLC (LON:EZJ) to soar in the third quarter.

Revenues for the three months ended 30 June jumped 16% year-on-year to £1.39bn (Q3 2016: £1.2bn), boosted by a “significant benefit” from Easter which fell during the period this year.

The Luton-based carrier added that higher load factors, which increased by 1.1 percentage points to 93.1%, and improving trading conditions also supported the strong growth.

READ: easyJet seeking approval to launch Austria-based airline to deal with post-Brexit world

Revenue per seat in the third quarter rose by 2.2% to £57.78 per seat, which was particularly impressive given that analysts had pencilled in a low single digit decline beforehand.

Cheaper fuel helped to drive down the overall cost per seat by 5.5%, although non-fuel costs in the quarter edged slightly higher due to additional spending over the summer months to improve operational resilience.

On the back of the “strong performance”, easyJet upgraded its full-year guidance and now expects to turn a profit before tax of between £380mln and £420mln, ahead of the current Bloomberg consensus of £375mln.

Boss hails ‘positive momentum’

“easyJet has delivered a strong performance in the quarter right across the business,” said chief executive Carolyn McCall who announced earlier this week she is stepping down at the end of the year to take over the reins at ITV plc (LON:ITV).

“Our purposeful and disciplined growth continues to strengthen our market positions and we are seeing an underlying improving revenue trend.

“Our continuing product and digital innovation is generating revenue growth. Our underlying cost control is strong, while our investment in resilience is delivering results in our operational performance.

“Although we expect capacity to continue to put pressure on yields, our progress this year has enabled us to upgrade this year's PBT forecast and demonstrates that after a difficult 18 months of external challenges easyJet once again has positive momentum.”

Outlook

Forward booking for the fourth quarter of this year are stronger compared to this time last year, with 67% of seats already sold (compared to 65% at this time in 2016).

Price competition, particularly on routes to key summer holiday markets such as Spain and Portugal, means revenue per seat for the six months to the end of September is expected to decline by around 2%.

Full-year non-fuel cost per seat guidance remains unchanged at a 1% increase.

Good news, but not good enough, says City broker

Liberum analyst Gerald Khoo thinks easyJet is still too expensive compared to its peers such as Ryanair PLC (LON:RYA).

“In our view, the current rating is pricing in a substantial upgrade to consensus estimates, which has not been forthcoming if management’s guidance range is accepted,” wrote Khoo in a note to clients this morning.

“We see the uplift being driven by a strong Easter, with management’s caution on the outlook for yield and industry capacity for next year echoing our concerns.”

The analyst has the stock as a ‘sell’ with a target price of £10.

Shares initially opened higher but almost immediately gave up those gains and are currently 6.49% to 1,326p. 

--Updates for share price--

Quick facts: easyJet plc

Price: 539.4 GBX

LSE:EZJ
Market: LSE
Market Cap: £2.14 billion
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