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EasyJet full-year profit falls 21%

EasyJet's operating profit fell 21% to £401 million ($503 million) in the year ended 30 September.

Revenue rose from £4.67 billion to £5.05 billion, but costs excluding fuel increased from £3.06 billion to £3.58 billion. Fuel costs fell £52 million to £1.06 billion.

Total revenue per seat declined marginally, by 0.4%, to £58.23, but at constant currency this is a decrease of 4.5%. The UK low-cost carrier notes the "persisting low fuel price environment, resulting in high levels of capacity growth and a competitive pricing environment which saw yields fall by 7.3% at constant currency".

Headline cost per seat excluding fuel increased 7.7% to £41.27 and 0.9% at constant currency. EasyJet cites "inflationary pressures in the market, particularly at regulated airports, and higher disruption costs as a result of a greater level of EU 261 compensation claims and an increase in welfare costs driven by significant industrial strike action and adverse weather conditions".

However, there was growth in ancillary revenue, which rose 8.6% to £11.38 per seat and reached £986 million as "high load factors and consumer-focused initiatives helped to offset ticket pricing pressures".

Passenger numbers rose 9.7% to exceed 80 million while load factor rose one percentage point to 92.6%.

Chief executive Carolyn McCall describes the results as "robust" during a "difficult year for the aviation industry".

She adds: "Our planned approach of achieving number-one or -two positions at Europe's leading airports, friendly and efficient customer service, and a continuous focus on sustainable cost control has put EasyJet at a strategic advantage during a period when there have been bankruptcies and some airlines have struggled operationally."

EasyJet added 79 routes during the year but axed a further 20 and says it plans to close its base at Hamburg in March 2018 "with greater return available by deploying those aircraft elsewhere in the network".

The Luton-based airline expects to close the acquisition of Air Berlin's operations at Berlin Tegel airport by next month. This include the airline entering into leases for up to 25 of the German carrier's Airbus A320, offering employment to up to 1,000 former Air Berlin crew members, and taking over other assets including slots.

There will be costs of £100 million associated with the acquisition, EasyJet estimates: the £40 million price paid plus a further £60 million loss from activities at Tegel in 2018.

Looking ahead, EasyJet's fuel is 82% hedged at $512 per metric tonne for the six months to 31 March 2018; 75% hedged at $514 for the full year ending 30 September 2018; and 45% hedged at $533 for the full year 2019.

"Revenue trends in the first quarter have been encouraging, primarily as a result of some capacity leaving the market," the airline says.

It continues to see the current market environment "as an opportunity to build and strengthen its network and customer proposition for the long term".

There are plans to grow capacity 6% in the current financial year, excluding any increase in its fleet and operations it acquires from Air Berlin.

Revenue trends in the first quarter have been encouraging, "primarily as a result of some capacity leaving the market".

The carrier expects to derive a saving of £100-125 million on its fuel bill next year as a result of its "advantaged hedging position".

It estimates negative impacts from exchange rates at £5 million.

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