EasyJet's focus on business passengers starts to pay off

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The Independent Online

EasyJet shares soared yesterday after the budget airline unveiled a surprise surge in revenues and predicted annual profits ahead of forecasts.

Revenues rose 23 per cent to £935m in the third quarter of easyJet's financial year as the company's plan to attract business flyers paid off. Its predicted pre-tax profit would be between £200m and £230m – well ahead of analysts' consensus of about £180m.

The no-frills carrier was forced to bring forward its trading statement from next Wednesday because its quarterly figures were so far ahead of consensus forecasts.

Carolyn McCall, easyJet's chief executive, said the results vindicated her moves to focus on flights from major European cities to attract business customers.

She said: "The strong operational and commercial performance in the quarter reflects the continued successful implementation of the strategy we outlined in November."

She said 75 per cent of summer seats were already booked but warned that easyJet still faced high fuel prices and a rocky economy.

EasyJet shares rose 55.3p, or 18 per cent to 368p.

Ms McCall took over in March last year at easyJet, which was her first job leading a public company. Some analysts questioned whether she had the industry knowledge to lead a budget airline in turbulent times after heading Guardian Media Group.

She had a bumpy first few months and recent performance marks a turnaround from January, when easyJet warned rising fuel costs, bad weather and air traffic control strikes would increase first-half losses.

EasyJet released its strong figures in the week after its founder and major shareholder, Sir Stelios Haji-Iaonnou, resumed his battle with the board over plans to expand capacity and called for a bigger payout to shareholders.

Sir Stelios's easyGroup business declined to comment yesterday.

Peter Hyde, an analyst at Liberum Capital, said the strong revenues could be used as an argument for more capacity but could also be used to boost the dividend.

"I think they have a very strong balance sheet at the moment and it would not be impossible for them to release some of that to shareholders," he said.

Easyjet said it would stick to its current dividend policy but that it would review its balance sheet at the end of the year.

Business bookings increased by a fifth in the third quarter after the group started marketing actively to companies for the first time. As a result, per-seat income rose 5.2 per cent to £56.02. There was also a sharp improvement in punctuality – something Ms McCall targeted when she arrived. On-time flights rose to 81 per cent from 57 per cent a year earlier, when crew shortages and chaotic rostering caused delays at easyJet's Gatwick UK hub.

Business was weak on North African routes because of political unrest in the region, Germany and on UK regional flights, which were hit by public sector cuts. But strong demand for city routes out of France, Switzerland, Spain, Italy and London more than made up for slowing sales elsewhere.