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LONDON (Alliance News) - EasyJet PLC Friday raised its full-year pretax profit guidance, saying it had taken about GBP5 million of revenue from Air France after that airline was hit by a costly pilots strike and after fuel prices swung in its favour.
In a trading update, the low-cost airline said it now expects pretax profit for the year that ended on September 30 to come in between GBP575 million and GBP580 million, up from the GBP545 million to GBP570 million guidance it gave in July.
"The impact of the Air France pilots' strike in September is expected to increase easyJet's revenue by circa GBP5 million as Air France passengers switched to easyJet," the British airline said in a statement.
Air France, part of Air France-KLM, was hit by a two-week pilots strike that ended on September 29. The pilots were protesting at the company's cost-cutting plans. Air France management said the strike cost the airline more than EUR200 million.
The Air France pilots are also angry about the company's plans to expand its low-cost operation, Transavia, via regional hubs around Europe, in an effort to compete with the likes of easyJet and Ryanair Holdings PLC. The company reportedly agreed to expand its Transavia operations only within France as a concession to the unions, but insists that it must have the right to vary employment contracts for those working at the low-cost subsidiary. The pilots - Air France pilots are paid more than Transavia pilots - want the same contract to be offered to all pilots across all Air France's operations.
EasyJet has a 14% market share for all passengers in France and 24% of the business market, according to Cantor Fitzgerald analyst Robin Byde, who last week wrote that he expected the British airline to be the main beneficiary of Air France's decision to drop or scale back Transavia's expansion.
EasyJet raised its guidance for revenue per seat in the second half of the year, and said unit fuel costs were now set to be favourable in the half. It said second-half capacity growth rose about 6.3%, down from previous guidance of a 6.4% increase, revenue per seat at constant currencies rose about 2%, up from the 1% forecast it gave in July, and it expects cost per seat excluding fuel at constant currencies to up about 0.7% on the year, compared with previous guidance of a 0.5% increase.
It said unit fuel costs in the six months to September 30 were favourable to the tune of about GBP2 million, compared with the adverse impact of up to GBP5 million it had predicted in July.
It said exchange rate movements in the second half were favourable by about GBP15 million, having previously predicted a favourable impact of up to GBP15 million.
The airline said it had a strong end to its financial year and its main summer trading period. Revenue per seat at constant currency in the final quarter grew about 1.5% .
It said it flew 6.1 million passengers in September, a 7.5% increase on the 5.7 million it flew in September 2013. Load factor increased 2.5 percentage points to 92.2%, from 89.7%.
On a rolling 12 month basis, passenger number to the end of September were up 6.6% to 64.8 million, and its load factor, a measure of how full its planes are, rose to 90.6%, from 89.3% in the previous 12 months.
The airline added that it expects to declare a dividend for fiscal 2014 based on a pay-out ratio of 40% of profit after tax, in line with its recently-revised dividend policy. It previously paid out about 33% of profit after tax.
"We finished the year strongly. Our performance demonstrates our continued focus on cost and progress against all our strategic revenue priorities and further emphasises easyJet's structural advantage against both legacy and low-cost competition," Chief Executive Carolyn McCall said in a statement.
The airline has grown strongly under McCall's leadership. Early in her tenure, she faced criticism from airline founder and current shareholder Stelios Haji-Ioannou for her fleet expansion plans, but she faced down that criticism and has rewarded shareholders with a strong share price performance and increased dividend payouts.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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