easyJet PLC Q1 Interim Management Statement (1820D)

TIDMEZJ

RNS Number : 1820D

easyJet PLC

27 January 2015

EASYJET TRADING STATEMENT FOR THE QUARTER ENDED

31 DECEMBER 2014

   A.   HIGHLIGHTS: 

Drive demand, conversion and yields across Europe

-- Seats flown grew by 2.9% to 16.6 million. Passengers carried increased by 4.1% to 14.9 million, and the load factor increased by 1.0 percentage point to 89.7%.

-- Total revenue grew by GBP34 million to GBP931 million and revenue per seat grew by 0.8% on a reported basis to GBP56.16 per seat or by 3.7% at constant currency. The growth in revenue per seat was driven by disciplined allocation of capital across the network, revenue management and digital initiatives and growth in business passenger revenue.

Maintain cost advantage

-- Full year cost per seat is expected to be in line with the guidance given at the full year results and be up by 2% on a constant currency basis. As expected in the quarter cost per seat excluding fuel decreased by 0.2% on a reported basis and increased by 3.7% on a constant currency basis.

-- The increase at constant currency was primarily driven by anticipated increases in charges at regulated airports, mainly in Germany and Italy, crew costs associated with building a resilient operation ahead of base openings, the phasing of marketing expenditure on the business traveller punctuality campaign and an increase in maintenance costs associated with the planned ageing of the fleet.

-- Cost per seat including fuel decreased by 2.0% on a reported basis and increased by 1.6% on a constant currency basis.

Build strong number one and two network positions

-- Continued to increase frequencies on routes, such as Geneva to London Gatwick, and connect existing network points, such as Amsterdam to Hamburg.

Disciplined use of capital

-- Strong balance sheet with cash and money market deposits of GBP913 million as at 31 December 2014.

Outlook

With first half bookings in line with last year, easyJet expects to report a first half loss before tax of between GBP10 million and GBP30 million assuming normal levels of disruption compared to the GBP53 million loss reported in the first half of last year.

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

"easyJet has made a good start to the year by continuing to deliver its strategy of making travel easy and affordable for passengers. We enjoyed a strong October across the network - particularly on UK leisure flights to beach destinations and on French domestic routes where we continued to build passenger numbers after a busy September."

"We further strengthened our network in the quarter adding around 500,000 seats, the majority of which are from airports where easyJet has a number one or number two position. This combined with our new TV ads aimed at business travellers enabled easyJet to sell record numbers of seats to business travellers in the first quarter."

"easyJet is well positioned to continue to deliver returns and growth to shareholders."

For further details please contact easyJet plc:

Institutional investors and analysts:

 
 Will MacLaren               [phone] 
 Michael Barker              [phone] 
 
   Media: 
 Paul Moore                  [phone] 
 Edward Simpkins Finsbury    [phone] 
 

A copy of this Interim Management Statement is available at http://corporate.easyjet.com/investors

KEY FINANCIALS

 
 Three months ended                    31 Dec 2014   31 Dec 2013   Change % 
 
 Passengers (m) (1)                           14.9          14.3       4.1% 
                                      ------------  ------------  --------- 
 Seats (m)                                    16.6          16.1       2.9% 
                                      ------------  ------------  --------- 
 Load factor (%) (2)                         89.7%         88.7%      1.0pp 
                                      ------------  ------------  --------- 
 
 Total revenue reported (GBPm)                 931           897       3.8% 
                                      ------------  ------------  --------- 
 Seat revenue reported (GBPm)                  916           883       3.8% 
                                      ------------  ------------  --------- 
 Non-seat revenue reported (GBPm)               15            14       4.2% 
                                      ------------  ------------  --------- 
 
 Total revenue per seat reported 
  (GBP)                                      56.16         55.71       0.8% 
                                      ------------  ------------  --------- 
 Total revenue per seat constant 
  currency (GBP)                             57.76         55.71       3.7% 
                                      ------------  ------------  --------- 
 Seat revenue per seat reported 
  (GBP)                                      55.27         54.83       0.8% 
                                      ------------  ------------  --------- 
 Non-seat revenue per seat reported 
  (GBP)                                       0.89          0.88       1.2% 
                                      ------------  ------------  --------- 
 
 Total revenue per passenger 
  reported(GBP)                              62.64         62.82      -0.3% 
                                      ------------  ------------  --------- 
 
 Average number of owned / leased 
  aircraft                                     226           217       3.9% 
                                      ------------  ------------  --------- 
 Average operating aircraft                    211           204       3.3% 
                                      ------------  ------------  --------- 
 Average utilisation owned aircraft 
  (hours per day)                              9.3           9.5      -1.5% 
                                      ------------  ------------  --------- 
 Average utilisation operating 
  aircraft 
  (hours per day)                             10.0          10.1      -0.9% 
                                      ------------  ------------  --------- 
 ASKs (bn)                                    18.0          17.5       2.9% 
                                      ------------  ------------  --------- 
 RPKs (bn)                                    16.4          15.7       4.4% 
                                      ------------  ------------  --------- 
 Average sector length (km)                  1,089         1,089       0.0% 
                                      ------------  ------------  --------- 
 
   B.   STRATEGIC PROGRESS 

In order to execute against its strategy to drive sustainable growth and returns, easyJet is focused on four key objectives:

   1.         Drive demand, conversion and yields across Europe 
   2.         Maintain cost advantage 
   3.         Build strong number one and two network positions 
   4.         Disciplined use of capital 
   1.   Drive demand, conversion and yields across Europe 

First quarter revenue and network performance

Passenger numbers grew by 4.1% in the quarter to 14.9 million(1) . Capacity (seats flown) increased by 2.9% as load factor improved by 1.0 percentage point to 89.7%. Total revenue per seat grew by 0.8% to GBP56.16 on a reported basis and by 3.7% on a constant currency basis. The growth in revenue per seat was driven by the:

   --      Disciplined allocation of capital across the network; 

-- Business passenger initiative including our first business television advertisement which helped drive our strongest ever business passenger performance in October;

   --      Continued investment in digital and revenue management initiatives; 
   --      Performance of allocated seating; 
   --      Yield management of bags; and 
   --      Strong October trading, particularly UK beach and domestic France routes. 

At London Gatwick, easyJet grew capacity by around 10% in the first quarter including the first winter flying of the slots acquired from Flybe. As expected, this has resulted in short term yield pressure at the airport. There is a significant opportunity over the next two years to drive improvement in revenue performance as easyJet optimises the use of the slots and as the additional capacity matures.

   2.   Maintain cost advantage 

First quarter cost performance

Cost per seat, on a constant currency basis and excluding fuel, is expected to increase by around 2.5% for the first half of the year and by around 2% for the full year in line with the guidance given at the full year results. This does not include an additional navigation charge from Eurocontrol of up to GBP12 million (3) which easyJet is disputing.

As expected, in the quarter cost per seat excluding fuel decreased by 0.2% on a reported basis and increased by 3.7% on a constant currency basis. The main drivers included anticipated increases in charges at regulated airports mainly in Germany and Italy, the phasing of marketing expenditure on the business traveller punctuality campaign and maintenance costs associated with the planned ageing of the fleet. In addition, crew costs increased in the quarter as a result of the early recruitment of crew to build a resilient operation ahead of three new crew base openings.

Cost per seat including fuel decreased by 2.0% on a reported basis and increased by 1.6% on a constant currency basis.

In the three months to 31 December 2014 easyJet lean delivered around GBP8 million of savings in the period which includes the benefit from longer term airport deals and ground handling efficiencies. easyJet expects easyJet lean to deliver GBP30 million to GBP40 million of sustainable savings per annum over the next five years.

Operational performance

A strong operational performance is critical to easyJet maintaining its cost performance. Ensuring aircraft depart on time minimises the costs of disruption and is also a key driver of customer satisfaction and loyalty.

Total cancellations for the quarter were 468 compared to 360 in the same period last year. The majority of the cancellations took place in December mainly due to general strikes in Italy and Belgium, crew strikes in France and Italy as well as the impact of the runway closure at Gatwick airport due to the Virgin Atlantic emergency landing.

On-time performance was broadly in line with the same period last year despite the impact of adverse weather across northern Europe and the impact of the Gatwick runway closure.

 
 OTP % arrivals within    October   November   December    Q1 
  15 minutes 
-----------------------  --------  ---------  ---------  ---- 
 2013                         86%        93%        84%   87% 
 2014                         85%        91%        82%   86% 
-----------------------  --------  ---------  ---------  ---- 
 

Fleet

As at 31 December 2014 the fleet comprised of 226 aircraft; with 75 A320s and 151 A319s.

Aircraft utilisation fell in the quarter with the average utilisation for operated aircraft decreasing by 0.9% to 10.0 hours per day due to schedule optimisation over the winter period.

   3.   Build strong number one and two network positions 

In the three months to 31 December 2014 easyJet secured an additional slot pair at Paris Orly and also gained approval to launch the route between Paris Charles de Gaulle and Tel Aviv. In addition, easyJet continued to increase frequencies on routes, such as Geneva to London Gatwick, and connect existing network points, such as Amsterdam to Hamburg.

   4.   Disciplined use of capital 

As at 31 December 2014 easyJet had cash and money market deposits (excluding restricted cash) of GBP913 million and net cash of GBP353 million.

In the quarter easyJet announced that it intends to pay an ordinary dividend of 45.4 pence per share, or GBP180 million, to shareholders. The dividend is subject to shareholder approval at the Annual General Meeting on 12 February 2015 and will be payable on 20 March 2015 to shareholders on the register at the close of business on 27 February 2015.

LOOKING FORWARD

Hedging

To reduce short term earnings volatility easyJet has put the following fuel and currency hedging positions in place:

Six months to 31 March 2015

84% of the anticipated US$ requirement hedged using forwards at $1.59

91% of the anticipated Jet requirement hedged using forwards at $957 / metric tonne

93% of the anticipated Euro surplus hedged using forwards at EUR1.19

82% of the anticipated Swiss Franc surplus hedged using forwards at CHF1.47

12 months to 30 September 2015

83% of the anticipated US$ requirement hedged using forwards at $1.58

84% of the anticipated Jet requirement hedged using forwards at $936 / metric tonne

84% of the anticipated Euro surplus hedged using forwards at EUR1.18

73% of the anticipated Swiss Franc surplus hedged using forwards at CHF1.47

Full Year to 30 September 2016

68% of the anticipated US$ requirement hedged using forwards at $1.64

63% of the anticipated Jet requirement hedged using forwards at $908 / metric tonne

59% of the anticipated Euro surplus hedged using forwards at EUR1.21

53% of the anticipated Swiss Franc surplus hedged using forwards at CHF1.47

Outlook

easyJet still expects to grow capacity, measured in seats flown, by around 3.5% in the first half of the year and by around 5% for the full year. With first half bookings in line with last year, easyJet now expects first half revenue per seat at constant currency to increase by around 2% compared to the previous guidance of flat to very slightly up on the prior year.

easyJet still expects cost per seat (at constant currency and excluding fuel) to increase by around 2.5% for the first half of the year and by around 2% for the full year. This does not include an additional navigation charge from Eurocontrol of up to GBP12 million (3) which easyJet is disputing. The cost per seat increase reflects the prior year's unusually benign winter weather and will primarily be driven by charges at regulated airports, particularly in Germany and Italy, increased navigation charges, and increased maintenance costs associated with the planned ageing of the fleet. In addition, the cost per seat increase reflects increased crew costs as a result of building a resilient operation and recruiting crew early ahead of three crew base openings.

It is estimated that at current exchange rates(4) and with jet fuel remaining within a $550 metric tonne to $750 metric tonne trading range, easyJet's unit fuel bill(5) for the first six months of the 2015 financial year is likely to decrease by between GBP30 million and GBP35 million compared to the six months to 31 March 2014. On a full year basis it is estimated that at current exchange rates and with jet fuel remaining within a $550 metric tonne to $750 metric tonne trading range, easyJet's unit fuel bill for the 12 months ending 30 September 2015 is likely to decrease by between GBP90 million and GBP130 million compared to the 12 months to 30 September 2014. easyJet expects that lower fuel costs will be beneficial for its customers as fares adjust.

In addition, exchange rate movements are likely to have around a GBP10 million favourable impact compared to the six months to 31 March 2014 and are likely to have around a GBP20 million adverse impact for the year to 30 September 2015.

easyJet expects its first half loss before tax to be in the range of GBP10 million to GBP30 million assuming normal levels of disruption. With around 15% of second half seats sold year to date, in line with this time last year, it is still too early to give guidance on second half revenue per seat or expected profits.

easyJet is successfully executing its strategy of offering its customers low fares to great destinations with friendly service so that it will continue to win in a more competitive market. This means easyJet is well placed to continue to deliver sustainable returns and growth for shareholders.

END

Notes:

1. Represents the number of earned seats flown. Earned seats include seats that are flown whether or not the passenger turns up because easyJet is a no-refund airline, and once a flight has departed a no-show customer is generally not entitled to change flights or seek a refund. Earned seats also include seats provided for promotional purposes and to staff for business travel.

2. Represents the number of passengers as a proportion of the number of seats available for passengers. No weighting of the load factor is carried out to recognise the effect of varying flight (or "sector") lengths.

   3.   Relates to the impact to the 2015 Financial Year. 
   4.   US $ to GBP sterling 1.5086,euro to GBP sterling 1.3214 as at noon on 22.1.15. 

5. Unit fuel calculated as the difference between latest estimate of FY'15 fuel costs less FY'14 fuel cost per seat multiplied by FY'15 seat capacity.

This information is provided by RNS

The company news service from the London Stock Exchange

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