EasyJet Calls Itself ‘Very Well Prepared’ for Brexit

 - January 22, 2019, 2:31 PM

EasyJet has become the second European low-cost carrier after Ryanair in recent weeks to warn that unit revenue is falling more than expected over the winter, but the UK operator remains upbeat on the effect of Brexit despite the ongoing lack of clarity on the terms of the country’s exit from the European Union in less than 70 days. In a call with analysts to discuss the company’s results for the quarter ended December 31, EasyJet executives characterized the airline as “very well prepared” for Brexit and likely “better prepared than anyone else that is out there,” according to EasyJet CEO Johan Lundgren.

The airline, which has registered 130 aircraft on its Austrian AOC, pledged it has made “good progress” in ensuring access to a spare parts pool in the EU27 and in transferring crew licenses, both of which it expects to complete by March 29. To comply with EU rules on ownership and control to continue flying across the bloc after Brexit, EasyJet has increased its European Union/European Economic Area shareholdings (excluding the UK) to around 49 percent. That brings it close to the 50.1 percent threshold it needs for recognition by the EU as European-owned and possessing an air carrier license under EU law. To satisfy the effective control rule, EasyJet insisted it has several options, including removing voting rights from UK-based shareholders after Brexit.

Despite the consumer and economic uncertainty created by Brexit, “demand currently remains solid and forward bookings for the period after March 29 are robust,” the London Luton-headquartered group stated. Both the EU and the UK have committed to ensuring that flights will continue if Britain leaves the EU without a deal on March 29, EasyJet noted, and Lundgren expressed confidence that flying at his airline will continue without disruption.

However, overall capacity deployed between the EU and the UK will freeze at 2018 levels under the terms of the European Commission’s proposal for a “basic connectivity” air transport agreement between the EU and the UK in the event of a no-deal Brexit. The bare-bones deals will result in the loss of 93,000 new flights and nearly 20 million airport passengers on the UK-EU27 market, according to the director of airports trade group ACI Europe, Olivier Jankovec.

Lundgren described the October to December quarter as “a good start to the 2019 financial year,” characterized by “robust” customer demand and ancillary sales underpinned by good operating and on-time performance across the network except for the disruption caused by the Gatwick Airport closures due to drone sightings. The disruptions affected about 82,000 EasyJet customers and resulted in the cancellation of more than 400 flights. They also cost the airline £15 million ($19.3 million) in passenger care expenses and lost revenue.

Revenue for the quarter rose by 13.7 percent, to £1.3 billion, on a 15.1 percent year-on-year increase in passengers to 21.6 million and a 4.1 percent fall in revenue per seat to £53.89. Capacity measured in seats flown increased 18.2 percent to 24.1 million, slightly lower than originally planned due in part to the drone issues at London Gatwick and late A321 deliveries from Airbus. Delivery delays also affected expected cost savings from the ongoing fleet up-gauging from A319ceo to A320neo and A321neo, albeit only marginally.

EasyJet now expects revenue per seat for the six months ending March 31 to decrease by “mid to high single digits”—compared with an earlier guidance of a low- to mid-single digit decline—owing to new accounting standards, the shift of Easter into the second half, and a more competitive market in Berlin.

EasyJet bought Air Berlin’s operations at Tegel after the German airline went bankrupt in 2017, but the LCC admitted on Tuesday the move faces constraints on its ability to deliver network efficiencies as quickly as anticipated. It now expects a loss in Berlin in the current financial year.