EasyJet: Paris and Egypt terror attacks took their toll but profits can fly higher

The budget airline said revenue per seat fell by 3.7 per cent during its first quarter

EasyJet boss Carolyn McCall warns price of flights could go up if the UK leaves the EU (Getty)

EasyJet suffered a sharp slowdown in demand last autumn after terror attacks deterred holidaymakers, but the budget airline said record low oil prices would keep it on course for higher profits.

EasyJet said revenue per seat fell by 3.7 per cent during its first quarter, to 31 December, although total revenue was down by just 0.1 per cent to £930m. The airline was hit hardest by a fall in demand after flights to Sharm el-Sheikh in Egypt were cancelled when a Russian plane flying from the resort was blown up on 7 November, and in the wake of the Paris attacks on 13 November, in which 130 people were killed. Flights to Sharm el-Sheikh remain suspended until at least 27 May.

Shares in EasyJet fell by 3 per cent to 1,579p, while the stock prices of rival airline groups IAG and Flybe also tracked lower as investors feared similar outcomes.

In the aftermath of Paris, revenue per seat was down in the high single digits in November and December, said EasyJet, which is the second-largest airline in France.

However, the company added that forward bookings for the second quarter were showing “a marked improvement” and that flights from the UK to beach resorts had been particularly strong in October.

The total number of passengers flown in the first quarter was still 8.1 per cent higher than at the same point in 2014, after it added more seats. But EasyJet was forced to cut fares to keep attracting passengers, particularly to big tourism destinations.

The chief executive, Carolyn McCall, said the airline would continue to focus on reducing costs this year, to make sure it could continue to increase profits and dividends.

EasyJet now expects expenses per seat, excluding fuel, to be just 1 per cent higher over the year, whereas in November it was predicting an increase in costs per seat of around 2 per cent.

The airline said it would take advantage of the plunging cost of aviation fuel – with oil prices at a 12-year low – to increase its available seats by 7 per cent this year.

It estimates that its fuel bill for the full year is likely to be between £165m and £180m lower than it was last year. However, it faces an extra £50m in foreign exchange rate costs in 2016.

The Luton-based operator said it was on course to meet pre-tax profit forecasts of £738m for the year, a rise of almost 8 per cent. Ms McCall promised low fares for customers and higher dividends for shareholders, saying: “This year we will consolidate that with a relentless focus on cost reduction, which is already delivering. This will ensure that EasyJet continues to win and continues to grow revenue, profit and dividends.”

James Hollins, an analyst at Nomura, said the French and Egyptian fallout was more damaging than expected but added: “These are relatively exceptional and short-term issues, while the more controllable and longer-term issue of cost efficiencies is better than we had envisaged.”