LONDON (Alliance News) - Shares in easyJet PLC soared Tuesday as the low-cost airline said it expects its pretax loss for the first-half of its financial year to be significantly narrower than it previously expected, after the mild winter reduced the need for costly de-icing of its planes and reduced disruption.
The airline now expects to post a pretax loss of between GBP55 million and GBP65 million in the six months to the end of March, compared with the GBP61 million loss it recorded a year ago.
Airlines and travel companies tend to be loss-making over the winter period, making most of their money during the summer months when there are more travelers.
Back in January, easyJet had said it expected to post a pretax loss of between GBP70 million and GBP90 million for the six months to the end of March. The expectation for a wider loss was mainly because Easter will fall in the second half of the financial year this year, having provided GBP25 million of additional revenue to its first-half results in fiscal 2013.
In January, Easyjet had expected cost per seat, excluding fuel and at constant currency, to rise about 1.5%, while revenue per seat at constant currencies was expected to be just "very slightly up".
However, that expectation has now been reversed, with revenue per seat expected to grow 1.5% compared with a rise in cost per seat of 0.5%. It is still adding 3.5% more capacity than a year ago.
It cut its cost expectations because its planes needed less de-icing and there was less weather-related disruption in the three months to the end of March. The airline said the reduction also reflected the early delivery of the benefits of some of its efficiency improvement programme.
It cited its decision to allocate passengers with seats as one of the reasons for the improved seat revenue growth expectations, along with a number of "digital and revenue management initiatives" that it didn't detail.
The original model for most low-cost airlines was that seats weren't allocated and passengers took seats on a first-come, first-served basis. However, that proved unpopular with customers as families and groups could end up being split up for the duration of the flight. eayJet trialed allocated seating in 2012, and introduced it across its fleet in November of that year following positive customer feedback.
Big rival Ryanair Holdings PLC, Europe's biggest low-cost carrier, initially resisted the move, but has also rolled out allocated seating on all flights from the start of February 2014.
Customers pay a fee for choosing their seats on both airlines.
In its statement, easyJet said fuel costs for the first half of the financial year will be up to GBP8 million more than in the year-earlier period, but that the impact of exchange rate movements would be broadly neutral.
Many companies have reported a hit from recent currency movements, particularly sterling's strength against other major currencies.
easyJet shares were up 3.4% at 1,686.00 pence just before the close Tuesday, one of the biggest gainers on the FTSE 100 and not far from the all-time high of 1,773 pence hit in February. The stock has risen 64% over the past 12 months.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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