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EasyJet ‘prepared for uncertainty’ as annual losses top £1.1bn

EasyJet said today it was too early to say what impact Omicron will have on European travel as the airline revealed annual pre-tax losses of more than £1.1 billion due to the continued impact of Covid.

Passenger numbers fell by 57.5% to 20.4 million and revenues were down by 51.6% to £1.5 billion as travel was hit by the pandemic in the year to September 30.

However, the budget carrier’s bookings for summer 2022 are ahead of pre-pandemic 2019 levels and an extra 25 aircraft will be added to the fleet to “capture growth opportunities”.

EasyJet expects a return to near pre-pandemic levels of capacity as people take “long awaited” summer holidays next year.

The airline is targeting growth to pre-pandemic capacity by 2023.

EasyJet said: “It’s too soon to say what impact Omicron may have on European travel and any further short-term restrictions that may result.

“However, we have prepared ourselves for periods of uncertainty such as this.

“While we’ve seen an increase in transfers with some softening of trading for Q1 [the current quarter] it is really encouraging to see that we are still seeing good levels of new bookings for H2 [the second half of the financial year].”

The airline plans expansion at Gatwick, Porto, Lisbon and Milan.

“Demand is accelerating with key periods such as October half term, ski and Christmas seeing strong performance,” the airline added.

“We continue to add capacity and expect to fly c. 70% of 2019 capacity in Q2 and expect that Q4 summer capacity will be at near 2019 levels.

“Customers will look for value as the economy recovers and short-haul leisure demand will lead the recovery. EasyJet will use its inherent strengths combined with the improvements made during the pandemic to grow throughout the recovery, which is already underway, and beyond.”

EasyJet said: “We have a golden opportunity to continue to take market share from our main competitors, who  fly 120 million seats in our markets and are facing challenges. As a result of these challenges they are focusing on long-haul whilst restructuring and retrenching their short-haul operations.”

It sees a “clear roadmap” to easyJet holidays contributing annual pre-tax profit of more than £100 million, reflecting the strength of the business model and “significant opportunities” to grow market share.

“Our holidays business has a highly scalable business model based on low fixed costs with strong margins and a digital platform which will provide a base for growth,” the airline said.

The airline expects to fly about 65% of 2019 capacity levels in the three months to the end of December with loads anticipated to be over 80%, while capacity for the January-March period is likely to be about 70% of equivalent 2019 levels.

“EasyJet has been ramping up capacity as customer confidence returns and current expectations are that Q4 full year ’22 capacity will have recovered to around Q4 2019 capacity levels,” it said.

“At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any further financial guidance for the 2022 financial year. Customers are booking closer to departure and visibility remains limited,” EasyJet added.

Chief executive Johan Lundgren said: “EasyJet is moving through the pandemic with renewed strength having transformed the business by optimising our network and flexibility, delivering significant cost savings while also step-changing ancillary revenue.

“These initiatives alongside our strong, investment grade, balance sheet provide easyJet with renewed strength to manage any further Covid related travel disruptions, as well as a platform to fast track our growth and deliver strong shareholder returns. With this platform, we have the ambition to beat our targets set earlier this year.”

He went on: “Having delivered full year ’21 ahead of consensus, we have seen an encouraging start to this year with strong demand returning for peak winter holiday periods, coupled with increasing summer demand with Q4 ’22 capacity expected to be close to  full year ’19 levels.

“As the UK’s largest carrier, easyJet expects a significant benefit as the UK bounces back next summer. Our winning formula combined with the improvements made during the pandemic will accelerate our recovery.

“With ambitious plans for profitable growth we are expanding our leadership positions at key bases such as Gatwick and Milan with additional slots and aircraft this year and have 118 aircraft on order with a further 59 purchase options and rights confirmed to further build on this in the years to come.

“In summary, we remain mindful that many uncertainties remain as we navigate the winter, but we see a unique opportunity for easyJet to win customers and take market share from rivals in this period.”

Incoming chairman Stephen Hester said: “We are very conscious that shareholders of all airlines have had a rough ride during the Covid pandemic and we will be straining every sinew to create real shareholder bounce back in coming years and to take the company beyond its previous peaks of performance.

“I was involved in and very supportive of the September rights issue and plans to capture opportunities going forward. The current market turbulence illustrates the value of a strong balance sheet for both capturing upside and defending downside risk.

“I intend to actively meet with shareholders whenever they find it helpful and look forward to supporting Johan and the team as they drive the company forward. I’m convinced there is a bright future for easyJet and look forward to helping that be realised.”

Walid Koudmani, market analyst at financial brokerage XTB, said: “While today’s positive results may provide some reassurance thanks to better than expected figures, investors will be closely following the ongoing pandemic situation as any major lockdowns or restrictions could have disastrous effects for the company and airline industry as a whole heading towards the end of 2021.”

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