The Week Ahead: EasyJet set to remain in the red as fuel bill bites

Airlines may have enjoyed a rally last week as the price of oil slipped, but that is unlikely to prevent the issue of fuel costs being a major focus of easyJet's half-year results tomorrow.

Noting that the budget carrier's "sensitivity is roughly such that a $10 move in fuel equates roughly £3m of cost", Wyn Ellis, of Numis Securities, believes the airline will report a pre-tax loss towards the higher end of the guidance of between £140m and £160m it gave at its update in January, despite the recent weakness of the dollar providing some relief.

Last week, eayJet trumpeted an impressive 35.1 per cent growth in passenger numbers in April. Nomura's Andrew Evans forecasts a fall in total revenue per seat of 2.3 per cent, "a result of weaker second-quarter pricing (a function of higher capacity growth in the second quarter and a drop-off in bookings during the poor weather) and lower ancillary revenues from bag charges".

Meanwhile, Mr Ellis says that in terms of easyJet's comments about the future, the market will "be especially sensitive ... with regard to bookings for the key summer months". EasyJet's rival FlyBe issued a profits warning last week, citing a slowdown in leisure passengers. Mr Ellis remains cautious, noting that "the consumer remains under pressure, particularly in the UK, and we believe that easyJet will be finding it difficult to recoup rising fuel costs via higher yields".


Outsourcing will be in focus this morning, with Serco posting an update in the wake of recent reports of growing government caution over using the private sector to provide public services. The group announces its interim management statement today, and Espirito Santo believes its contract wins should be similar to the £1bn it saw in the same period a year before.

Thomas Cook is also reporting today, and JPMorgan Cazenove says the tour operator's operating loss for the first six months will accelerate by £40m to £170m, with a hit of roughly £20m from the recent unrest in Tunisia and Egypt and the same amount from Easter coming late in the year.

Results/Updates: Centrica, Hiscox, HSBC, Inmarsat, Lonmin, Serco, Telecity, Thomas Cook and Travis Perkins.


Following on from Serco, fellow outsourcer Capita will update the market tomorrow, with Espirito Santo expecting it to match last year's performance. Analyst David Brockton notes that "greater acquisition spend has already been a notable feature of the period, with six businesses acquired to date through 2011 collectively worth at least £83m", but adds that "organic growth will be the key determinant for any sustainable re-rating".

In a similar vein, TUI Travel will follow in the footsteps of Thomas Cook with an update tomorrow, and despite facing the same issues, JPMorgan Cazenove believes losses over the first half will have improved by £2m to £312m, helped by "good trading (excluding UK and France) and positive foreign exchange movements".

Results/Updates: Balfour Beatty, BG Group, Capita, CSR, easyJet, G4S, Imperial Tobacco, InterContinental Hotels, Morgan Crucible, N Brown, National Express and Tui Travel.


Restaurant Group is expected to strike an upbeat tone when it posts an update alongside its annual meeting. Citigroup predicts that the company will end up seeing like-for-like sales growth of 2.5 per cent over the full year, which should cancel out cost inflation to keep its margins steady.

A year-end trading update from the Comet owner Kesa Electricals is also due out on Wednesday. Although Britain's economic outlook may be gloomy, Royal Bank of Scotland points out that about 70 per cent of the group's sales are overseas. The broker says data from France, Kesa's core market where it owns the Darty chain, shows an average rise of 5.2 per cent each month in consumer electrical sales over the first quarter Like-for-like sales in France are likely to have grown by 1 per cent over the year.

However, its analysts believe Kesa's UK losses will have grown to €10.7m, noting that "the market's focus has been on Comet's poor performance and whether the brand has a future in the UK market".

Results/Updates: Bovis Homes, Barratt Developments, Drax, FirstGroup, Greggs, International Personal Finance, J Sainsbury, Kesa Electricals, Prudential, Rathbones, Restaurant Group and Wood Group.


Results/Updates: 3i, Aegis, Amlin, BT, Cookson, ENRC, Informa, Old Mutual, Pace, RSA, Supergroup, Tullett Prebon, Tullow Oil and Yule Catto.


Results/Updates: Catlin, Dignity, LSE, Petrofac and Spectris.

Economics Diary


EU Sentix investor confidence index.


BRC retail sales monitor; RICS house price balance; US import price index.


Bank of England inflation report; Trade balance; US budget statement; US oil inventories; US trade balance.


EU industrial production; European Central Bank monthly bulletin; Industrial production; Manufacturing output; NEISR GDP estimate; US business inventories; US PPI; US retail sales; US unemployment data.


US CPI; US University of Michigan consumer sentiment.