easyJet has published strong results for the year ending 30 September 2018, reporting a rise in total revenue of 16.8% to £5,898 million from £5,047 million in 2017.
The low-fare giant saw a rise of 10.2% in the number of passengers carried, flying a record 88.5 million of them. It partly attributed this to a growth in capacity of 9.8%, with its load factor also increasing by 0.3% to a record 92.9%.
Ancillary revenues were also strong for the carrier, growing an impressive 22.7% to £1,210 million. The airline saw an 11.7% increase in ancillary revenue per seat year-on-year, driven in part by enhancements to baggage options and allocated seat rates, the trial for in-flight entertainment and the growth of the Worldwide by easyJet platform – which the airline has now confirmed also includes Dubai-based Emirates.
Headline profit before tax for the year reached £578 million, up 41.4%, while total headline profit before tax per seat increased 28.7% to £6.07 per seat. Reported profit before tax increased to £445 million from £385 million in 2017.
Johan Lundgren, easyJet’s chief executive, said: “easyJet has delivered a great performance during the year, growing headline profit before tax by 41%, once again flying a record number of passengers at our highest ever annual load factor. The integration of new operations at Tegel has also progressed well and our brand consideration in Berlin has grown strongly. Our financial success and increasing customer loyalty demonstrate the resilience of our operations, the underlying strength of our business and our unrivalled customer experience.”
He added that while disruption continues to be a “major challenge” for the industry, the airline is investing in resilience to help mitigate the impact on customers.
Operating in the European short-haul market, easyJet said it is well placed to strengthen its market positions with continued GDP growth supporting spending in its major markets.
The total European short-haul market grew by 5.6% year-on-year and by 2.8% in easyJet’s markets. The airline said this was lower than in previous years, reflecting issues including a rising price of oil – the price of Brent Oil rose by 44% during the financial year. Fuel represented 22% of the airline’s cost base over the financial year.
The carrier reported a positive trading environment, noting competitor capacity reductions particularly as a result of the bankruptcies of Monarch, Air Berlin and Alitalia, as well as the impacts from Ryanair’s winter flight cancellations and summer strike actions.
easyJet said it is preparing for Brexit, operating via airlines in the UK, Switzerland and Austria to enable ongoing operations in Europe, and at 47% is close to achieving majority EEA (excluding UK) ownership.
Integrating Tegel
The airline saw an increase in some costs, with headline cost per seat excluding fuel up 5.3% to £43.43 (or 4.8% increase at constant currency), citing the expansion into Berlin Tegel, higher levels of disruption and crew cost inflation.
The acquisition of part of Air Berlin’s operations at Berlin Tegel was completed on 15 December for €40 million. easyJet’s flying programme at Tegel began on 5 January 2018 operating an adopted winter schedule with a fleet of mainly wet leased aircraft. The airline said: “As anticipated, Tegel flying has resulted in a dilutive impact to overall load performance and revenue per seat and an increase in cost per seat whilst the operation becomes established.”
The headline loss was higher than expected (£112 million) due to increases in the unhedged fuel cost, airport charges and taxes as well as late competitive capacity in the market. However, total loss before tax was better than originally expected at £152 million, the airline said, due in part to faster than planned transition of crew and fleet.
Airline costs
The airline incurred £133 million in non-headline costs during the 2018 financial year, up from £23 million in 2017. These included commercial IT development changes, the transition and integration cost of Air Berlin’s Tegel operations and the sale and leaseback of the group’s 10 oldest A319 aircraft. The group also incurred £7 million in ‘Brexit-related costs’ associated with establishing its new Airline Operator Certificates (AOCs).
easyJet’s total fuel cost for the year was £1,184 million (up from £1,062 million in 2017) of which £60 million related to Tegel. Fuel cost per seat of £12.44 was 1.5% higher than last year, but decreased by 4.3% at constant currency. Despite the increase in the market price of fuel, easyJet said the operation of its hedging policy meant the average effective fuel price decreased by 1% to $590 per tonne, from $596 per tonne in the previous year.
Based on today’s fuel prices, easyJet expects unit fuel costs for the year to 30 September 2019 to be between £50 million and £100 million as a result of its hedging position.
Growth plans
As at 30 September 2018 easyJet’s total fleet comprised 315 aircraft, made up of 42% A319s, 57% A320s and 1% A321s. Over the next five years the airline aims to reduce cost per seat by improving the fleet mix and in the 2018 financial year it took delivery of 49 aircraft and exited 13.
The airline announced it has reached an agreement with Airbus to extend its fleet plans into 2023, providing more flexibility in the schedule and securing delivery slots. The agreement includes the exercise of purchase rights resulting in firm orders for 17 A320neo under an existing framework agreement signed in 2013.
The agreement also includes the deferral of delivery dates of 18 A320neo aircraft by up to 24 months, and the conversion of 25 purchase rights for A320neo into purchase options, securing delivery slots in 2024.
Meanwhile, the airline’s new Worldwide by easyJet connections service continues to grow and easyJet has confirmed Emirates as a new airline partner for the platform, which is expected to be live in the coming months, revealing the Middle East connection it has been hinting at for some time.
easyJet customers will be able to connect between easyJet flights across its European network flying into London Gatwick Airport and onwards on Emirates flights, initially between London Gatwick and Dubai, but with plans to extend more gateways and destinations.
In the report the airline said: “easyJet continues to see the current market environment as an opportunity to build and strengthen its network and customer experience for the long-term.” The carrier plans to grow capacity by around 10% for the 2019 financial year and by around 15% in the first half year.
Revenue per seat for the first half is expected to be down by low to mid-single digits, in line with previous guidance due to dilution from Tegel and the effect of Easter moving into the second half of the year, while total headline cost per seat excluding fuel is expected to be flat for the 12 months to 30 September 2019.
Capital expenditure for the financial year to 30 September 2019 is expected to remain in line with previous guidance at £1 billion.
Discussing the results, Lundgren went on to say: “Forward bookings are solid, with 50% of seats sold in the first half, in line with the prior year. We are confident in our positioning for the future and are focused on driving future returns, positive free cash flow over the longer term and maximising our headline profit per seat as we continue to deliver value for our customers and shareholders.”
