November 20, 2012 / 11:16 AM / in 5 years

EasyJet doubles dividend as European rivals struggle

LONDON (Reuters) - British low-cost airline easyJet doubled its dividend after annual results showed it took business from fading European rivals and customers bought more cheap flights for late summer holidays.

Competitors are struggling to deal with high fuel costs, weak consumer confidence and the eurozone crisis. Some ceased operations this year, leaving gaps in the market that low-cost airlines have been quick to exploit.

IAG’s (ICAG.L) Spanish carrier Iberia said this month it would axe almost a quarter of its workforce and rationalise its network. Germany’s Lufthansa (LHAG.DE) said it would deepen cost cuts to counter the rising fuel prices and limited market growth.

“Set against the difficulties which the industry has been facing, typified by the recent Iberia announcement, easyJet has managed to shoot the lights out,” said Richard Hunter, head of equities at stockbroker Hargreaves Lansdown. “The doubling of the dividend was a clear statement of management intent around easyJet’s prospects.”

Shares in EasyJet (EZJ.L), which have risen by 80 percent this year compared to a 17 percent rise for the FTSE 250, were up 6.3 percent at 694.25 pence by 1053 GMT, valuing the airline at around 2.75 billion pounds.

Europe’s second-largest budget airline after Ryanair (RYA.I) reported pretax profit up 28 percent at 317 million pounds for the year to the end of September, at the upper end of its guidance.

The company based in Luton, southern England announced a full-year dividend of 21.5 pence, up from 10.5 pence last year.

Profits have doubled since Carolyn McCall took over as chief executive in July 2010. She said easyJet would begin paying shareholders one third of its profit after tax each year, up from one fifth last year, confident in its strength on European short-haul routes.

    EasyJet said it benefited from sun-starved Britons taking last-minute holidays to Malaga and Alicante in Spain and Faro in Portugal to flee wet weather at home and from Londoners getting away after the Olympics.

    It added flights between top business destinations and introduced flexible tickets and allocated seating in an attempt to steal corporate customers from legacy carriers such as IAG’s British Airways.

    “Companies are being more cost conscious, which has helped us win more corporate work,” said McCall, adding that easyJet had won accounts with Britain’s Parliament, defence ministry and several banks and insurers in the last year.

    The airline is in talks with planemakers Airbus EAD.PA, Boeing (BA.N) and Bombardier (BBDb.TO) over the purchase of more fuel efficient jets and plans to increase seat capacity by up to 5 percent a year over the coming five years.

    EasyJet, which will fly between London, Manchester and Moscow from next year, said revenues increased 11.6 percent to 3.85 billion pounds, while its fuel bill rose 182 million pounds to 1.15 billion pounds. The carrier expects fuel costs to be around 30 million pounds higher in 2012/13. (Editing by Kate Holton and Tom Pfeiffer)

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