EasyJet today pledged to follow a strategy of disciplined growth with a “radically changed” holidays arm to be revealed in late 2019 while reporting a 10.2% uplift in annual passenger carryings to 88.5 million.
The UK budget carrier revealed that cancellations increased significantly to 6,814 in the year to September 30 against 2,502 in the previous 12 months.
The industry-wide issue was attributed to “significant third party industrial action activity” by air traffic control and ground handling staff, particularly in France, air traffic control capacity constraints due to systems upgrades and bad weather.
Despite the disruption, £152 million in losses from former Air Berlin operations at Berlin Tegel airport and a £65 million hit from a switch in technology development, easyJet saw pre-tax profit growth of £60 million to £445 million in the year to September 30.
The airline said it had a “solid hedging position” to provide a buffer against fuel head-winds over the next 18 months.
On the UK’s departure from the EU, the carrier said: “EasyJet has continued to prepare for Brexit, operating via airlines in the UK, Switzerland and Austria to enable ongoing flying in Europe, and is close to achieving majority EEA (excluding UK) ownership – currently at 47%.”
The airline, which has a fleet of 316 aircraft, incurred £7 million in costs associated with establishing its new Airline Operator Certificates (AOCs), mainly due to the cost of re-registration of aircraft in Austria as well as legal and overhead costs.
Ancillary revenue was up by almost 23% in the period to £1.21 billion.
Capacity is projected to grow by 10% for the full year 2018-19.
EasyJet reported “solid demand” in forward bookings of 50% for the winter six months, with yields ahead of loads
Bookings for next summer were described as “promising” at this very early stage, slightly ahead of summer 2018.
The airline said: “As competitors continue to try to restructure their high cost bases or operate with inadequate financial resources, easyJet is well positioned selectively to strengthen its market positions.
“Economic trends remain favourable across Europe with continued GDP growth supporting spending in all of easyJet’s major markets.”
Garry Wilson joined last week from Tui as the first chief executive of easyJet Holidays.
“He will continue to build the team and the total customer offer which we expect to launch in late 2019,” the airline said.
The carrier said it saw a “big opportunity to radically change its holidays offering,” based on its existing network of destinations and frequencies, low-cost operations, its customer base, strength of brand and the ability to develop a customer experience that is aligned with the easyJet core offer.
“Currently there are 20 million existing customers who fly to easyJet’s top 29 destinations by market share, of whom only 500,000 book a hotel through easyJet. This is an opportunity for easyJet to extend its reach in the wider travel value chain through the offer of accommodation and other services, with investment taking place in 2019 and 2020,” the airline said.
“On the biggest and most attractive flows into the most popular destinations in Europe, easyJet has a market share, a frequency and most importantly a cost position that no one else can match.
“EasyJet will use its data and digital capability to support the offer, driving ancillary revenue through increasing conversion and attachment rates and the overall average booking value.
“EasyJet will further develop its website and booking process and add data-driven customisation to maximise the attraction to customers.
“By combining a quality, great value hotel offer with the flexibility of multiple frequencies to major European destinations, we will deliver a better value experience for our customers.”
The airline aims to “significantly improve” its profit by moving to a contribution rather than commission model.
“EasyJet has already spoken to a large number of hotel partners in Europe and is progressing well to develop deeper and stronger direct relationships with them,” the carrier said. “These relationships will inevitably help easyJet deliver a better value offer and experience for its customers.
“EasyJet’s core focus will remain on airline services, but the holidays offering incorporates other aspects of the customer journey which can be sold to a customer base that is well aligned and that has high capacity and frequencies on beach, city and ski destinations.”
Chief executive Johan Lundgren said: “EasyJet has delivered a great performance during the year, growing headline profit before tax by 41%, once again flying a record number of passengers at our highest ever annual load factor.
“The integration of new operations at Tegel has also progressed well and our brand consideration in Berlin has grown strongly.
“Our financial success and increasing customer loyalty demonstrate the resilience of our operations, the underlying strength of our business and our unrivalled customer experience.”
He added: “Our strategy continues to ensure we are well positioned for the future.
“We have made considerable progress on our new initiatives in holidays, business and loyalty, which will enable us to grow profitably.
“While disruption continues to be a major challenge for the industry, we are investing in resilience to help to mitigate the impact on our customers.
“Forward bookings are solid, with 50% of seats sold in the first half, in line with the prior year.
“We are confident in our positioning for the future and are focused on driving future returns, positive free cash flow over the longer term and maximising our headline profit per seat as we continue to deliver value for our customers and shareholders.”
More: Garry Wilson joins easyJet to head up holidays business