Bloomberg News

EasyJet Surges as Corporate Bookings Lift Revenue: London Mover

February 01, 2012

Jan. 26 (Bloomberg) -- EasyJet Plc, Europe’s second-biggest discount carrier, rose the most in six months after 200,000 additional business bookings sent quarterly sales surging.

EasyJet rose as much as 12 percent in London trading after revenue jumped almost 17 percent to 763 million pounds ($1.2 billion) in the first quarter ended Dec. 31, offsetting fuel- bill increases and curbing an anticipated first-half loss.

Chief Executive Officer Carolyn McCall has added flights on key routes while introducing allocated seating, flexible tickets and sales via corporate agents to grab a bigger slice of a business market in which later bookings offer yields, or fares, typically 20 percent higher than for leisure trips. EasyJet lured 2.3 million corporate travelers in the three months, aided by the establishment of a dedicated 10-person sales team.

“Discount airlines are doing very well, despite the economy,” said Gert Zonneveld an analyst at Panmure Gordon in London with a “buy” recommendation on the stock. “EasyJet is a solid business with a strong balance sheet and a strong brand name which hasn’t yet been translated into superior valuations.”

Shares of EasyJet, based in Luton, north of London, gained 49.7 pence to 453.5 pence, the most since July 22, and were trading 9 percent higher at 440 pence as of 2:40 p.m. in the U.K. capital London, valuing the company at 1.89 billion pounds.

Ryanair Gains

The stock has advanced 12 percent this year after slumping 11 percent in 2011. Larger rival Ryanair Holdings Plc traded 4.1 percent higher today and has added almost 15 percent this year.

EasyJet’s sales gain, which has been aided by a milder winter, will allow it to absorb most of a 100 million-pound jump in jet-fuel costs for the fiscal first half, McCall said today, limiting the pretax loss to an estimated 140 million pounds to 160 million, compared with 153 million pounds a year earlier.

“EasyJet has made a strong start to the year,” the CEO said in a statement. “The good performance in the quarter has meant we are cautiously confident in our outlook.”

The carrier lured more corporate flyers even as the overall business-travel market contracted in the quarter, it said, citing U.K. Guild of Travel Management Companies data. Market share is being boosted by a decision to devote 70 percent of new capacity to strengthening existing routes with most potential to lift yields, such as southeast England, France and Switzerland.

Banking, Retail

From London, EasyJet operates 14 daily flights to Amsterdam, 12 apiece to Glasgow and Edinburgh and 10 to Barcelona. New clients include some banks and retailers, spokesman Paul Moore said, while declining to identify any.

Stelios Haji Ioannou, the company’s founder and largest shareholder, said in a statement that management had overstated the impact of business passengers, and that the increase is “not a big deal” for earnings, with some corporate clients flying on “half-empty” services in the afternoon, when fares are lower.

The entrepreneur has been at loggerheads with EasyJet’s board for more than three years in a dispute over jet purchases, and he plans to vote against remuneration awards at the company’s annual meeting next month.

The overall passenger count increased 8.1 percent to 12.9 million in the quarter, boosting occupancy levels almost 1 percentage point to 87.6 percent, while revenue per seat grew 7.7 percent, the statement said. Some 70 percent of available seats have already been sold for the half, in line with a year ago, with bookings running at 15 percent for the second half.

EasyJet’s passenger revenue per seat increased 6.5 percent to 40.29 pounds, with ticket prices strengthening as competitors “retrenched,” it said. Ancillary sales for items such as checked bags increased by 68 pence to an average 4.70 pounds a seat and sales fees and charges increased 1.24 pounds to 5.88 pounds.

First-quarter sales were estimated at 725 million pounds by analysts at Deutsche Bank AG and 730 million pounds at UBS AG.

Numis Securities lifted its recommendation to “hold” from “reduce” and raised its full-year pretax profit estimate to 225 million pounds from 193 million pounds. Credit Suisse analysts raised their annual forecast 8 percent to 240 million pounds, while predicting a 217 million-pound first-half loss.

--With assistance from Brian Lysaght in London. Editors: Chris Jasper, Chad Thomas.

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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