Global Economics

EasyJet Gains from British Airways Woes


Passenger numbers for the discount airline grew nearly 10% in June thanks to bargain-hunting fliers and strikes against BA that grounded many of its flights

EasyJet (EJETF) became the second budget airline to post buoyant passenger figures this week, as discounters continue to benefit from the pain suffered by rival British Airways (BAIRY).

The no-frills airline yesterday revealed that its passenger numbers for June were up almost a tenth over the previous year. Over 4.5 million people flew with the airline in June, up from 4.1 million a year earlier.

A spokesman for the group said the company had planned for growth of 10 per cent this year, adding that June "was the first month not to be affected by the volcanic ash." This followed an 8 per cent rise in passenger numbers during May. "EasyJet has grown through the recession," the spokesman said. "People are still flying, but they are more budget conscious." He added that the group had benefited from the woes at BA.

Gert Zonneveld, an analyst at Panmure Gordon, said it was a positive sign that easyJet's planes were fuller, citing a metric known as the load factor, which rose from 86.3 per cent to 87.2 per cent. "The economic recovery was maybe a little stronger than they expected," he added.

The results echoed news the previous day which showed that rival Ryanair's (RYAAY) traffic had grown by 15 per cent in June over the previous year, from 5.8 million people to 6.7 million.

The announcements from Ryanair and easyJet brought BA's fortunes into sharp relief, as it also revealed passenger numbers on Monday. The UK's flagship airline, which has been beset with problems, saw passenger numbers nosedive by 12.5 per cent after it was disrupted by strikes at the start of the month. The action is estimated to have cost the company £150m.

The number of passengers fell from 2.9 million in June last year to 2.5 million last month. The industrial action, as well as the disruption caused by the volcanic ash cloud, drove numbers down 16.9 per cent between April and June.

The company said in a statement: "Although the yields over the period have been stronger year-on-year, reflecting the underlying economic improvement, they have not fully offset the impact of lower volumes."

BA has not fully faced down the prospect of further strikes. The cabin crew are set to vote on whether to accept the company's latest pay offer after Unite sent out the ballot papers yesterday. The process is expected to take two weeks and the union said it was making no recommendation over whether its members should vote to accept or reject the airline's offer.

EasyJet has become embroiled in problems of its own. It is locked in a bitter court battle with its founder, Sir Stelios Haji-Ioannou, and is waiting for a decision in the case, which wrapped up in June, before the end of this month. The Greek-born entrepreneur has accused the airline of breaching the "Easy" brand, and criticised the management for poor decision-making.

A major issue is the company's failure to pay a dividend in its 10 years on the stock market, in favour of retaining earnings to buy more aircraft. He said on the witness stand at the High Court that he had seen "the results of this strategy have been and what it is likely to lead to." EasyJet's chairman, Sir Michael Rake, outlined the company's defence in May, adding that the board was "surprised and disappointed to find itself in a public debate over strategy." He pointed out that since floating, the share price had risen 34 per cent, more than any of its European rivals.

Provided by The Independent—from London, for Independent minds

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