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LONDON (Alliance News) - easyJet PLC Chief Executive Carolyn McCall on Thursday said the budget airline will continue to grow in the UK and will not reduce capacity there despite uncertainty caused by the UK's decision to leave the European Union.
Shares in easyJet were down 5.0% at 1,071.00 pence on Thursday morning, the biggest faller in the FTSE 100, followed by British Airways-owner International Consolidated Airlines Group, down 3.5%. Outside the FTSE 100, direct competitor Ryanair was down 4.8%.
McCall's comments came a day after rival budget airline Wizz Air PLC said it has started readjusting its network and halving its intended growth to the UK for the second half of its financial year, planning to redeploy this capacity to non-UK routes.
Wizz Air decided to do this due to weakness in the pound caused by the Brexit vote reducing fares in euro terms on routes to and from the UK. Wizz Air shares were down 4.1% Thursday.
On Thursday, however, McCall told journalists that easyJet will "take advantage" of weaknesses in other airlines and will focus on growing in the UK rather than reducing capacity.
Earlier Thursday, easyJet reported a fall in revenue in the third quarter of its financial year as flight cancellations resulting from terrorist attacks, bad weather and air traffic control strikes offset a rise in seat capacity.
The low-cost airline said total revenue in the quarter ended June 30 fell by 2.6% year-on-year to GBP1.20 billion, as revenue per seat declined by 7.7% to GBP54.54, despite the number of passengers carried rising by 5.8% to 20.2 million and load factor increasing by 0.3 percentage point to 92%.
easyJet said the number of passengers carried was boosted by an increase in capacity of 5.5% to 21.9 million seats, but revenue declined as the increased seat capacity was offset by the impact on yield of overall market capacity and cancellations as a result of "significant external events".
Those events included the terrorist attacks in Brussels in March and the crash of an Egyptair flight in May, as well as air traffic control strikes, runway closures at Gatwick airport, and severe weather.
They led to 1,221 cancellations in the period, up from 726 a year earlier, while disrupted passengers were allocated seats that normally would have been sold close to departure for a higher yield, hitting revenue per seat.
June was the worst hit, with easyJet suffering from 852 cancellations and 11 air traffic control strikes.
In addition, a shift in capacity to the western Mediterranean and away from the Middle East and North Africa as led to an over-supply of seat capacity in those two markets, reducing yields.
easyJet added that approximately 65% of expected bookings for the fourth quarter have now been secured, with booked average revenue per seat declining by around 7.5% at constant currency, noting that the terrorist attack in Nice, France and attempted military coup in Turkey last week have given rise to an uncertain revenue per seat trajectory for the fourth quarter.
Capacity in the fourth quarter is expected to grow by 6%.
"More recently currency volatility as a result of the UK's referendum decision to leave the EU as well as the recent events in Turkey and Nice continue to impact consumer confidence," Chief Executive Carolyn McCall said in a statement, referring to the failed military coup in Turkey last weekend and the proceeding terror attack in France.
easyJet's comments were echoed by German airline Deutsche Lufthansa AG, which also reported a fall in revenue in its latest results statement on Thursday, posting a decline to EUR15 billion in the first half of 2016 from EUR15.4 billion the year before.
Lufthansa noted that advance bookings, especially on long-haul routes to Europe, declined significantly due to the terrorist attacks which have plagued Europe in the past year, as well as "greater political and economic uncertainty". As a result, Lufthansa lowered its full-year earnings forecast, expecting revenue to fall in the second half, while also cutting its capacity growth plans.
easyJet's McCall said: "The easyJet business model remains robust, with a strong cash position, solid balance sheet and a flexible fleet plan. The easyJet team is confident in its ability to navigate the period ahead and drive long-term advantage."
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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