EasyJet Warns on Profit, Citing 'Brexit' Uncertainty Ahead -- 2nd Update
June 27 2016 - 4:54AM
Dow Jones News
By Robert Wall and Saabira Chaudhuri
LONDON--Budget airline easyJet PLC warned on profit, joining a
similar warning from British Airways parent International
Consolidated Airlines Group SA and other fallout in signaling how
the economic uncertainty after Britain's vote last week to exit the
European Union would take its toll on earnings.
The latest warning comes amid further indications of nervousness
in Britain's business community. In a survey of more than 1,000
businesses by the Institute of Directors, an organization for
company directors and senior business leaders, more than a third of
those polled said the so-called Brexit would cause them to cut
investment.
"We can't sugarcoat this--many of our members are feeling
anxious," said Simon Walker, the institute's director-general. "A
majority of business leaders think the vote for Brexit is bad for
them, and as a result plans for investment and hiring are being put
on hold or scaled back."
Most business leaders surveyed said their first priority is the
protection of the economy from the negative reaction in financial
markets, followed by the need to secure a new trade arrangement
with the EU.
A quarter of those polled said they would freeze hiring, while
5% said they would cut jobs. Roughly 22% said they are considering
moving some of their operations outside of the U.K.
In its warning, Luton, England-based easyJet said a confluence
of factors from the referendum's outcome would join with lower
airfares, air-traffic-control strikes in France and exchange-rate
effects to hurt results for the third quarter, ending this
month.
Pretax profit would be hit by GBP28 million ($37.5 million),
also reflecting the impact from continued suspension of flights to
Egypt's Sharm El Sheikh after last October's suspected bombing of a
Russian jetliner that departed the beach resort.
EasyJet said per-seat revenue would be 1.6 percentage points
lower. Per-seat sales would fall about 8.6% in the period compared
with the expected 7% decline, it said.
The airline also said it faced GBP25 million in further
full-year costs.
With Britain's vote to leave the EU, easyJet said it anticipated
"that additional economic and consumer uncertainty is likely this
summer and as a consequence it is expected that revenue per seat at
constant currency in the second half will now be down by at least a
mid-single-digit percentage compared with the second half of
2015."
Rival IAG, which also owns Irish carrier Aer Lingus and Spanish
airlines Iberia and Vueling, Friday said it no longer expected to
reach its full-year target of an operating profit increase on par
with last year's. The operating profit target was around EUR3.2
billion ($2.5 billion).
The warning from EasyJet about the uncertainty ahead for the
airline comes after Chief Executive Carolyn McCall lobbied hard for
the U.K. to remain in the European trading bloc. Pressure on the
British pound intensified on Monday amid a volatile trading session
for currencies in Asia, after the U.K. voted to leave the European
Union on Friday and its currency closed at its lowest levels in
more than 30 years.
The airline, Europe's second-biggest discount carrier after
Ryanair Holdings PLC, now faces uncertainty over its operations,
notably the traffic rights that allow the airline to freely service
cities across the EU.
Ms. McCall said Friday that the company has asked the U.K.
government and European Commission "to prioritize the U.K.
remaining part of the single EU aviation market, given its
importance to trade and consumers." The airline said it had "been
preparing for this eventuality in the lead up to the referendum
vote and has been working on a number of options that will allow it
to continue flying in all of its markets," without providing
details.
EasyJet said it had experienced 1,061 cancellations in the April
through June months, also citing congestion at London Gatwick
airport and severe weather.
Write to Robert Wall at robert.wall@wsj.com and Saabira
Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
June 27, 2016 04:39 ET (08:39 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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