Europe's largest low-cost carrier, EasyJet, slipped into the red in the first half of its financial year as its yields continued to fall. In an attempt to boost load factors on Go routes up to its own levels, EasyJet sold tickets cheaply, which pushed its continually falling yields 10.7% lower than the same period last year. The drop in unit costs from "synergies arising through the acquisition" was only 5%, the company admits.

EasyJet reported sales in the six months to 31 March up 92% to £373 million ($598 million), but it lost £48.1 million before tax, compared with £1 million profit in 2001-2.

The outlook for the rest of the year is mixed. Chief executive Ray Webster says last month's passenger numbers were 34% higher than last year, but says this was affected by Easter, which fell in April this year but in March last year. However, yields are still down 3% from last year and "the trading environment is challenging". The airline will also have to meet "significant" deposits for new aircraft, with unknown effects on its cash balance.

Webster told analysts last week that "high levels of growth come at a cost" in terms of lower fares and yields. Yields would continue to be under pressure in the second half of the year, and a good performance in the late summer would be "crucial" to meeting forecast profits of up to £70 million for the full year. EasyJet has traditionally only made profits in April to September, with the exception of last year.

Though the direct costs of taking over Go have been relatively small, EasyJet admits its efforts to improve the financial performance of its former rival have cost it indirectly.

Source: Flight International