LONDON (Alliance News) - Shares in low-cost airline easyJet PLC soared Tuesday after the company said it expects its pretax loss for the first-half to be lower than previous expectations as it revised expected revenue per seat higher after a milder winter reduced its de-icing costs.
The FTSE 100-listed company was leading the blue-chip index after it said it now expects to deliver a first-half performance ahead of the guidance given in its interim management statement on January 23, when easyJet said it expected its pretax loss for the half-year to come in between GBP70 million and GBP90 million.
easyJet's revised expectations state that the firm now expects a narrowed pre-tax loss of GBP55 million - GBP65 million, compared to the GBP61 million pretax loss the previous year for the six months to March 31, 2014.
easyJet reduced its pretax loss expectation after better-than-forecast revenue per seat growth, and as costs excluding fuel rose less then it had expected thanks to the mild winter which resulted in a reduced levels of de-icing and disruption during the period.
The company also said it was especially buoyed by its decision to introduce allocated seating, which has proved popular with other low-cost carriers, with rival Ryanair later following suit.
Revenue per seat growth at constant currency for the six months to March 31 is expected to be around 1.5%, said easyJet, driven partly by allocated seating, increased average sector length and several digital and revenue management initiatives. Previously the company said the metric would be "Very slightly up."
The uptick becomes more significant when considering that the reporting period does not include the Easter period, traditionally a busy time for airlines, thus boosting its expectations further. Last year Easter fell on March 31, resulting in GBP25 million of additional revenue in the first-half of 2013. In this financial year Easter will fall in its second-half on 20 April.
Cost per seat growth, excluding fuel, at constant currency is expected to be around 0.5%, better than the forecast 1.5% growth announced in January. This is due to a "benign winter with reduced levels of de-icing and disruption" in the three months to March 31 as well as the early delivery of a number of easyJet lean initiatives, said the company.
easyJet's unit fuel cost in the six months will be up to GBP8 million pounds adverse to the prior year. The impact of exchange rate movements will be broadly neutral compared to last year. The company's forecast for capacity growth for the first-half of the year remains unchanged at around 3.5%.
"easyJet has continued to execute its strategy delivering another good performance in the first half of the year. This performance demonstrates our continued focus on cost and progress against all our strategic priorities. It also demonstrates easyJet's structural advantage in the European short-haul market against both the legacy and low-cost competition. Our strategy of offering our customers low fares to great destinations with friendly service and a focus on cost control ensures that we can continue to deliver sustainable growth and returns for our shareholders," Carolyn McCall, easyJet's Chief Executive said.
The airline has led the FTSE 100 for much of the day, now trading 5.18% higher at 1,716.48 pence per share.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
Copyright © 2014 Alliance News Limited. All Rights Reserved.
easyJet (EZJ)