EasyJet set to make first-half profit despite £7m write-off on Nats

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The Independent Online

Easyjet, the no-frills airline, is preparing to write off its investment in National Air Traffic Services although it expects to be profitable in the first half of this year.

The company said it was currently reviewing the value on its balance sheet of its £7m investment in The Airline Group, the private sector partner of Nats.

In February, the Government and four banks had to bail out Nats with a £60m cash injection, to save it from collapse. EasyJet was part of a consortium of seven airlines that put up £50m of equity and borrowed another £700m to take a 46 per cent stake in Nats last year, in one of the Government's most controversial partial privatisations.

A spokesman for easyJet said: "We didn't go into this for short-term financial reasons but for strategic reasons – that the users of Nats shape its direction and charges."

In a general trading update, the company said it would make a "modest" profit in the first half of its financial year, to 31 March, although it has made a loss in the past over this period – including a £7m loss last year. It was unclear whether yesterday's forecast took into account the likely Nats write-off.

Over winters, airlines generally put on fewer flights, more planes go in for maintenance, and flights are more likely to be cancelled because of bad weather.

However this year, easyJet has been helped by the fact that Easter fell in March and the weather has been good. The company said that higher passenger volumes had made up for lower yields – the profit per passenger kilometre flown. On Monday, the company reported a 39 per cent jump in the number of passenger carried in March.

EasyJet added: "Insurance premiums have increased substantially [after 11 September] ... this has been more than offset by favourable fuel prices."

Despite the upbeat news, easyJet shares fell 7 per cent to 475p, on concern over higher fuel costs and lower yields in the second half of the year.

UBS Warburg, the company's house broker, yesterday downgraded its recommendation on easyJet from "strong buy" to "buy". It said: "The stock has had an exceptionally strong run from below 250p – we think it deserves a short-term breather in the face of (unhedged) fuel price risk."

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