EasyJet profits plunge despite record passenger numbers

EasyJet saw its profits fall 17% last year, with more than £100m lost due to the slump in the pound after the Brexit vote.

The airline reported a record year for passenger numbers, flying 80.2 million people, almost 10% more than in 2015-16, on ever fuller planes.

But while revenues exceeded £5bn in 2016-17, fares dipped to fill seats in what the chief executive, Carolyn McCall, said was “a difficult year for the aviation industry”.

McCall said: “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.”

Profits before tax fell from £494m to £408m. Despite paying a lower dollar price for fuel, the continued weakness of sterling brought additional costs of £101m, easyJet said.

The airline will also be prompted by Brexit to change its rules to ensure easyJet is majority owned and controlled by EU nationals after 2019.

About a third of shares are owned by the easyJet founder, Stelios Haji-Ioannou, who has dual UK-Cypriot nationality, and will be classed as EU-owned. But easyJet will ask at its 2018 AGM for new powers to force UK shareholders to sell up if necessary to allow it to continue operating in Europe. McCall said the move was “a technical, administrative thing” and the airline had “no concerns” about getting enough EU shareholders.

Shares rose by more than 5% in early trading, on the back of the airline reporting high levels of forward bookings and better revenue so far in its 2017-18 financial year, which it said was “primarily as a result of some capacity leaving the market”. The collapse of Monarch, plus the decision by Ryanair to cancel thousands of flights, has reduced competition in the low-cost sector for this autumn and winter.

McCall said there was “positive momentum” including rising ancillary revenues, driven by high sales on the mobile app, as well better inflight brands.

EasyJet expects to increase its capacity by another 6% next year, before the expected addition of Air Berlin slots.

The company last month announced it would acquire part of the German airline’s operations at Berlin Tegel airport, including leases for up to 25 A320 aircraft and taking on up to 1,000 crew in a £40m deal. The airline said it would expect a further £60m costs before it turns around the loss-making operation but would see a profit by 2019.

The airline said it would pay dividends of 40.9p per share in March, a windfall of about £55m for the biggest shareholder, Haji-Ioannou.

McCall is leaving easyJet at the end of November to run broadcaster ITV, and will be replaced as chief executive by Johan Lundgren, previously deputy chief executive of Tui Group.

The newcomer will earn a basic salary 5% higher than McCall’s at £740,000 – raising further questions about the gender pay gap. McCall said it was a question for the board: “I don’t set the salary for the successor. The board has to set the right salary.”

She said she was proud to have increased customer loyalty at easyJet during her seven years in charge. “Our customers don’t see the low-cost model – we have got enormous loyalty from passengers, 60 million last year were repeat customers. That’s testimony to our crew and people.”