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EasyJet 'to outspeed Ryanair on profits'
Robert Lea, Evening Standard20 Nov 2007
EasyJet threw down the gauntlet to arch-rival Ryanair today, declaring that its profits will grow 20% over the next year on top of the 50% increase in earnings it has posted for the last 12 months.
That compares with Ryanair's own estimated profit growth of about 17% as it expects to have to ramp up its ticket giveaways this winter to keep passengers flying.
Increasing ancillary revenues such as charging passengers extra for speedier boarding and persuading them to book hotels when they are booking their tickets, helped easyJet to record pre-tax profits of £201 million in the year to the end of September, up from £129 million last time.
A 6% cut in costs, mainly from running a fleet of more efficient younger aircraft from its new orders of 150-seater Airbuses, also helped offset soaring oil prices.
But it is on revenue forecasts that easyJet is trumpeting it will outperform Ryanair.
The Irish budget airline has warned its yields - the key air fares performance indicator showing revenues per passenger - will be down by 5% over the winter, traditionally the toughest season for the airlines.
However, easyJet said today it expected its yields to be flat over the coming months and start growing again next summer when the airline will be able to start pushing up prices in comparison to the spring and summer of 2007 when Gordon Brown's air passenger duty rise prevented any air-fare inflation.
EasyJet chief executive Andy Harrison said that yield improvement on top of an expected 15% growth in its network in Europe will produce underlying pre-tax profits in the current financial year up 20% or stripping out exceptionals, a figure of £230 million - fast gaining on the £330 million Ryanair expects to make.
"These are best-ever results, and we expect more to come," said Harrison.
The battleground for easyJet has moved away from the UK, where it is the country's largest airline to mainland Europe where it is currently the fourth-largest carrier.
UK domestic flight and passenger numbers are expected to be flat in the next year while numbers to the continent from Britain are expected to rise by around 15%. The real growth - expected to be about 30% - is expected be within mainland Europe.
Harrison said the current battlegrounds are in Italy, where the low-cost airlines are taking advantage of the vacuum created by the crumbling national flag carrier Alitalia, and in Spain, where easyJet and Ryanair have moved in aggressively on the bigger fare-charging Spanish airlines.
The airline, which has expanded from its original Luton home to become Gatwick's biggest airline after last month's £100 million takeover of former British Airways ally GB Airlines, expects to carry 42.5 million passengers this year.
That is up from 37.2 million this year showing growth of 13%.
EasyJet said ancillary revenues soared by 30% in the year, making up a tenth of its revenues of £1.8 billion.
Harrison also said that he expected the acquisition of GB, a specialist to North Africa, to be profitable after £12 million of one-off costs.
