McCall sees EasyJet profits model on course

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EasyJet chief executive Carolyn McCall believes the carrier’s latest trading update underscores the airline’s financial performance has not been de-railed by concerns in the European market over capacity and yield.

The airline is now guiding for pre-tax losses of £55-65 million ($90-107 million) for its financial first half – which runs over the traditionally loss-making winter season. This is an improvement on its earlier forecast of £70-90 million. The loss would be in line with its previous first-half pre-tax loss £61 million but which also included the lucrative Easter period.

“What we basically said with the trading update is the strategy is working, the business is on track,” said McCall, speaking to Flightglobal during the carrier's recent launch of a base in Naples. “We are slightly ahead of ourselves on costs. Some of that is because it was a very benign winter and that means less de-icing costs, but also EasyJet lean initiatives have come in early so we are ahead of ourselves in delivering some of the cost initiatives we had planned. So that’s a good cost story.

“Revenue per seat has been holding up,” she says, pointing to the £25 million hit from Easter falling in the second half this year and noting travel advisories to Egypt have hit some of its traditional winter sun routes.

“There are now much lower yields generally in the market than the year before, but still you’re growing your revenue per seat year-on-year,” she says. “We are still growing yield, and of course allocated seating and business travel is helping, both of those are things we can control about our revenue per seat.”

Much of the concern on European trading environment came after Ryanair last autumn twice cut its profit expectations citing a deteriorating yield climate.

“Everyone was worried about the capacity environment and I think [the] Ryanair [profit announcements] kind of freaked everyone out,” says McCall. “But we were saying the fundamentals have not changed for EasyJet, we are still competing with the legacies.

“Legacy carriers are taking capacity out of the market and we are the ones putting capacity in. And therefore we are controlling the capacity environment.Our own capacity was driving a lot of the capacity increases and actually, probably they [Ryanair] were exposed to some different dynamics then we were.

“We are in different markets, we are a different model, and I think both of those things had something to do with that,” she says.