Business

EasyJet lifted by testing boost as airline cuts first-quarter losses

THE boss of easyJet has flagged the airline’s view that Covid testing for travel across its network “should soon become a thing of the past” as it reported a jump in bookings following this week’s move by the Scottish and UK governments to remove travel restrictions for fully vaccinated people arriving in the country.

But the budget airline, which employs about 560 people in cabin crew and pilot roles across Scotland, warned the Omicron variant would continue to have an impact on short-term performance in the second quarter.

EasyJet underlined its expectation of a “strong summer ahead” as it reported it had nearly halved first-quarter losses, while “significantly” reducing its cash burn in the three months ended December 31.

The outbreak of the Omicron variant “paused” the momentum it had built in October and November when load factors strengthened and rose above 80 per cent for both months. The load factor, a key airline metric highlighting the proportion of available seats occupied by passengers, declined at easyJet in December amid renewed travel restrictions to tackle Omicron, coming in at 77 per cent rather than 80% as previously guided, with the company stating that the variant would have an impact on its quarter-two performance.

However, the removal by the UK Government of pre-departure testing resulted in a “sustained step-change improvement in booking volumes”.

EasyJet added that the subsequent decision to lift restrictions for fully vaccinated people arriving in the UK from February 11 boosted business further, “which we expect will continue to have a positive impact on sales going forward”.

Chief executive Johan Lundgren said: “Booking volumes jumped in the UK following the welcome reduction of travel restrictions announced on 5 January, which have been sustained and then given a further boost from the UK Government’s decision earlier this week to remove all testing requirements. We believe testing for travel across our network should soon become a thing of the past.

“We see a strong summer ahead, with pent-up demand that will see easyJet returning to near 2019 levels of capacity with UK beach and leisure routes performing particularly well.

“We remain confident that easyJet will continue to win customers and are excited about our plans for the summer as we identify further opportunities at our key bases which, alongside our step-changed ancillary offering, will deliver strong, sustainable shareholder returns.”

EasyJet booked total group revenue of £805 million for the quarter ended December 31, which compares with £165m for the first three months of 2021. It flew 11.9 million passengers, up from 2.9 million last time, which helped it cut losses for the quarter to £214m versus £423m last time. Cash burn was cut to £450m from £969m, despite the removal of furlough across most of Europe and delivery payments, as the company took delivery of four new aircraft.

Ali Gayward, UK country manager for easyJet, told The Herald that the company had recently seen strong demand for flights to ski holiday destinations around Europe for the current winter sports season, as well as for more traditional summer locations since testing restrictions began to be eased.

Ms Gayward said there is “significant pent-up demand out there”, adding: “We saw that a couple of weeks ago when we saw the easing of testing restrictions. We saw that again when France eased their travel restrictions too just in time for the ski season, so this is tremendously welcome.

“We are looking forward to a really strong summer on the back of it now, and of course the changes will be in place for half-term holiday breaks for so many families too.”

Ms Gayward said the airline has throughout the pandemic seen bookings respond positively each time there has been an easing of Covid rules in different markets around the world. She added: “We see it every single time and there is no reason for this time to be any different.”

Asked to sum up the current, general mood across the aviation sector as the threat of Omicron appears to ease, Ms Gayward replied: “We always expected this winter to be a bit of a bumpy ride, and we prepared ourselves for that. But I think the general feeling is always that summer 2022 would see us being able to get back to near summer 2019 levels of flying, and certainly from seeing the pent-up demand we are seeing that is proving to be true so far.

“We are very confident about how the summer will be.”

On whether any noticeable trends are emerging on favoured destinations, or if there are any signs of people changing their travel habits, Ms Gayward said: “So many people have not been able to have a proper summer holiday for the last couple of years. There have been some recent surveys which showed that British holidaymakers are planning to take at least two holidays this year to make up for lost time, maybe even more. And it’s the good old strong, popular markets, particularly your Spains, your Portguals where people want to go to. But of course right now we are seeing a big increase in demand for ski [destinations].”

Ms Gayward said about one-third of the airline’s seat capacity flies out of Scotland, with 11 per cent of its flying “touching” the country. It has four aircraft based in Glasgow, eight in Edinburgh, and also operates from Inverness and Aberdeen. “It’s a hugely important part of our market,” she said.

Asked whether easyJet had plans to expand its operations in Scotland, she said: “We have got really ambitious plans for growth all of our markets.

“We are looking at all sorts of opportunities for what we can do moving beyond summer 2022 and into 2023 and beyond.

“ It is a really, really important part of our overall network.”

Matt Britzman, equity analyst at Hargreaves Lansdown, said the easing of testing restrictions “finally give the airlines some good news”, but issued a warning about the impact of inflation.

He said: “Some good work’s been done to help offset the rising cost element, with initiatives in place last year set to deliver £250m sustainable annual savings under normal conditions. There’s no denying the next few months still look challenging, but there’s a glimmer of hope on the horizon with so many more holidaymakers preparing to pack their bags.”

Shares in easyJet edged up 5p at 640.4p.

Previous ArticleNext Article

Leave a Reply

Your email address will not be published.