UK-based airline operator easyJet Plc (EZJ.L, EJETF.PK) Tuesday reported a decline in profit for fiscal 2010, despite an increase in revenues, hurt by higher fuel costs, lower interest income and exchange rate impact. The company sees a tough winter ahead and said that it expects to make substantial profit improvement in 2010.
The company reported full-year 2009 net profit of GBP 71.2 million compared with GBP 83.2 million a year ago. Earnings per share were 16.6 pence, down from last year's 19.4 pence.
The company said that results for the year have been significantly impacted by fuel prices and hedging, US dollar and euro exchange rates and a reduction in aircraft utilisation.
Profit before taxation dropped 50.4% to GBP 54.7 million from GBP 110.2 million in the previous year. On an underlying basis, pre-tax profit reached GBP 43.7 million, 64.5% lower than GBP 123.1 million in fiscal 2008.
The underlying financial performance excludes a profit of GBP 11 million on the disposal of three aircraft in 2009 and costs of GBP 12.9 million associated with the integration of GB Airways in 2008.
The company also reported fiscal 2009 revenues of GBP 2.67 billion, up 12.9% from GBP 2.36 billion in the prior year. Passenger revenue was GBP 2.15 billion, representing an increase of 7.8% from GBP 1.995 billion last year.
However, the company's strong revenue performance was partially offset by GBP 30.5 million reduction in interest income and GBP 86.1 million increase in unit fuel costs.
Ancillary revenue rose to GBP 516.3 million from GBP 367.1 million in the prior year. easyJet said that ancillary revenue income grew 38% for the year to GBP 9.77 per seat. The checked bag charge averaged GBP 4.51 per seat, an increase of GBP 1.73 per seat, and other ancillary revenues were up by GBP 0.97 to GBP 5.26 per seat for fiscal 2009.
Total revenue per seat rose 10.9% to GBP 50.47, or 4.1% at constant currency, to GBP 47.36, driven by the strength of the easyJet network, competitor capacity reduction of around 6%, strong ancillary revenue performance and a 2.6% sector length increase. Passenger revenue per seat was up 5.9% in fiscal 2009 to GBP 40.70, but it declined 1.9% on a constant currency basis.
Further, the company said that capacity in terms of seats flown increased only 1.8% to 52.8 million despite a 16% increase in average aircraft during the year, as a result of the decision to reduce flying activity particularly through the winter. Passengers increased 3.4% to 45.2 million from 43.7 million a year ago. Load factor for the year was 85.5%, an increase of 1.4 percentage points from 84.1% in the previous year.
Available Seat Kilometres, or ASK, was 58.17 billion, compared with 55.69 billion in the previous year. Revenue Passenger Kilometres, or RPK, rose 6% to 50.57 billion.
Further, the company said that margins in the past two years have been severely impacted by higher fuel prices with a total increase of GBP 5.71 in unit fuel costs.
easyJet said that its Board has agreed a fleet plan which will deliver around a 7.5% growth per annum in seats flown over the next five years. This fleet plan will enable the company to grow its share of the European short-haul market from around 7% to 10%. The company now expects to deliver cost savings of GBP 190 million by the end of financial year 2012. The company also said that the sale of the seven A321s from the GB Airways sub-fleet continues to progress. It is anticipated that the remaining A321s will leave the fleet by the end of September 2010. The five A319s previously held for sale have been returned to the fleet and will be used to support our mainland European expansion plans in 2010, easyJet noted.
As at September 30, the company's total fleet comprised 181 aircraft. A further 70 easyJet specification aircraft deliveries are currently planned for arrival over the next three years, a net increase of 26 aircraft over the period. This will make an expected total number of aircraft of 207 by 2012.
The company also stated that no dividends have been paid or proposed for the year ended on September 30.
Going forward to 2010, easyJet said that its pre-tax result at current fuel prices and exchange rates will benefit by around GBP 100 million from lower fuel prices as higher price fuel hedges roll off, slightly offset by a strengthening US dollar.Capacity, measured in seats flown, for both the first half and the full year 2010 is expected to increase around 10% compared to last year. The current expectation is that competitor capacity on easyJet routes will be down by low single digits.With over 45% of the available first half seats now booked, total revenue per seat at constant currency is expected to decline by a few percentage points in the first half of the year compared to last year.
Andy Harrison, easyJet Chief Executive, stated, "We see a tough winter ahead. We are focusing our efforts on further cost savings and efficiency improvements together with optimising route profitability and aircraft allocation. We shall also benefit as our fuel hedges adjust to market prices. Putting all this together, at current fuel prices and exchange rates, we expect easyJet to make substantial profit improvement in 2010."
EZJ.L is trading at 385.50 pence on the LSE, down 6.70 pence, on a volume of 632,593 shares.
EJETF.PK closed at $6.8098 on October 19.
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