easyJet profits fall after year of challenges

easyJet A320
Adrian Pingstone

easyJet has reported a 28% fall in annual profits amid a £138m hit from increased competition, a string of terrorist attacks that knocked traveller confidence and currency turmoil since the Brexit vote.

The carrier warned it expected Brexit currency headwinds to continue to take their toll on earnings in its current financial year.

Commenting on the results, Carolyn McCall, easyJet Chief Executive said:

easyJet achieved a resilient performance in 2016, in the face of significant challenges including a series of external events and foreign exchange headwinds.

“Over the last year we have carried a record 73 million passengers who have enjoyed a third successive year of falling fares.  This great value combined with our friendly service on Europe’s leading network means that passenger loyalty continues to grow with 54 million of them flying with us again in 2016 – 21 million more than five years ago.

“The team has worked diligently throughout the year to drive out cost and secure our strong number one positions through disciplined growth.   This has enabled easyJet to deliver almost half a billion of profit and an attractive dividend in line with our 50% pay out policy.

“Looking ahead, the easyJet model remains strong as does the demand environment and we continue to see opportunities in the medium term to grow revenue, profit and shareholder returns.  In a tougher operating environment strong airlines like easyJet will get stronger and we will build on our already well-established network.

“Almost half of our growth next year will be in the UK, with significant growth also in Switzerland, France and Italy. Our strategy of strengthening our positions at our key airports will see double digit growth in key bases in London, Manchester, Venice, Berlin and Amsterdam.”

Results in brief

  • Record number of passengers at 73.1 million, up 6.6% year on year with record load factor at 91.6% (2015: 91.5%), reflecting easyJet’s resilient business model and ability to drive demand, even in challenging markets
  • Capacity grew by 6.5% in the period to 80 million seats, as easyJet strengthened its leadership positions in selected markets
  • Total revenue of £4,669 million (a decline of 0.4%) and revenue per seat of £58.46 (a decline of 6.4%, and of 6.9% at constant currency(1)) reflecting the impact of external events
  • Total cost per seat improved by 2.0%, decreasing to £52.26 (a decrease of 4.6% at constant currency). Cost per seat excluding fuel increased by 2.6% to £38.31 and improved by 1.1% per seat at constant currency, slightly ahead of target, despite high levels of disruption.
  • Return on capital employed at 14.6% remains significantly above easyJet’s cost of capital
  • easyJet’s results demonstrate resilient underlying performance, delivered in spite of unprecedented external events which have impacted profit before tax by an estimated £150 million3 and net foreign exchange headwinds of £88 million. Profit before tax in the period was £495 million (2015: £686m)
  • Dividend declared of 53.8 pence per share (2015: 55.2 pence), in line with the Company’s increased payout policy of 50% of profit after tax
  • Business model and strategy underpinned by sector leading balance sheet strength: easyJet ended the year with net cash of £213 million (2015: £434 million) and sector leading credit rating (Standard and Poors: BBB+, Moodys: Baa1)

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