January 21, 2020 / 7:25 AM / a month ago

EasyJet lifted by tailwinds from strong demand and Thomas Cook's demise

LONDON (Reuters) - British budget airline easyJet (EZJ.L) expects its first-half performance to improve from last year, it said on Tuesday, helped by robust travel demand and a slight easing of competition after the collapse of Thomas Cook.

Reporting on the quieter winter period, easyJet flagged an upturn in its revenue per seat and said its first-half headline pretax loss would narrow from the 275 million pounds ($358 million) in the same period last year.

Chief Executive Johan Lundgren said there was limited visibility on the key summer season, in which easyJet tends to make all of its profit, but he expects the positive momentum to continue.

“Our bookings are slightly ahead for the half year and it looks the same when we go into the next half,” he told reporters.

Shares in easyJet gained 4.7% to 15.21 pounds by 0838 GMT.

The company’s first-half revenue per seat is now expected to increase by mid to high single digits, it said on Tuesday, upgrading a previous forecast for it to rise by low to mid single digits after an 8.8% jump in its first quarter.

Bernstein analyst Daniel Roeska described the growth in revenue per seat as “the star of the show”.

“An encouraging trading statement with a very upbeat revenue per seat number,” he said.

SELF-HELP

EasyJet said the failure of holiday company Thomas Cook last September lifted its revenue per seat by 1.5% in its first quarter - the three months to Dec. 31 - alongside a boost from “self-help” measures.

These measures include the use of data and modeling to make predictions that help to maximize ticket prices in the seven days before a flight.

Further gains were made from strong travel demand that also enabled rival Ryanair (RYA.I) to upgrade its profit forecast this month.

“Consumer demand remains in a good place versus last year,” Lundgren said.

Both airlines are also benefiting from subdued market capacity growth, driven not only by Thomas Cook’s failure but also airline discipline and the grounding of the Boeing 737 MAX.

FILE PHOTO: An easyJet Airbus A319-100 airplane is pictured at Leonardo da Vinci-Fiumicino Airport in Rome, Italy, March 30, 2019. REUTERS/Alberto Lingria

The strong appetite for travel comes despite the aviation industry coming under increasing pressure to reduce emissions in the face of the growing “flight shame” movement.

EasyJet last year said it would become the world’s first major airline to operate on net-zero carbon emissions across its flight network and it said the policy is reaping rewards.

“They (customers) state that they are overall more satisfied with the experience and that they are more likely to choose us,” Lundgren said when asked about the net-zero commitment.

Reporting by Sarah Young; Editing by Kate Holton and David Goodman

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