EasyJet investors hope strong summer sales boosted loss-making airline

Investors will be hoping that easyJet reveals stronger sales from the critical summer season as it is set to post steep losses from the year.

The budget airline is expected to post pre-tax losses of about £177 million when it reveals its full-year trading statement on Thursday October 13, according to market consensus.

However, earnings from the latest quarter are set to boost the company with analysts at Goodbody predicting a £474 million profit during the period.

Goodbody also said it is expecting greater losses than the market consensus, by about £40 million, because it has taken into account the recent drop in value of the pound and the impact on fuel costs.

Holidaymakers endured flight cancellations over the summer with airports such as Heathrow and Gatwick facing severe staff shortages that left them struggling to cope with the sudden ramping up of demand for overseas holidays.

The disruption continued into August with easyJet cancelling dozens of flights from Gatwick despite the airport claiming it had returned to “business as normal”.

However, easyJet recently said its operations have normalised since July and on-the-day flight cancellations are lower than pre-pandemic levels.

It flew around 16 million passengers in July and August which should help boost earnings during the last three months.

Investors could be looking for any impacts on easyJet of the cost-of-living squeeze on household finances, analysts said, and will be scanning forward bookings and in-flight purchases for evidence.

On the other hand, easyJet says that in tough times customers might switch to its cheaper flights, and away from higher-cost rivals.

Derren Nathan, an equity analyst at Hargreaves Lansdown, said: “It will be revealed if the expected improvements in load factor have materialised, and it would be good to see some guidance for bookings in this new financial year.

“With consumer confidence on the wane people will be looking for evidence as to whether forward bookings are starting to suffer and whether people are starting to pull back on extras such as food, luggage allowances and additional leg room.

“This is a highly profitable revenue line, which has enjoyed considerable growth since travel restrictions have eased.”

Investors will also be keeping an eye out for evidence that rising fuel costs have impacted the group.

It previously assured shareholders that it had hedged about 83% of its fuel for the last three months and around 60% for the first half of the 2023 financial year, meaning it has fixed prices to avoid spiralling costs.

But the weakening pound against a stronger dollar could have impacted easyJet in recent weeks as airlines pay for a large proportion of their costs, including fuel, in dollars.

In September, easyJet chief executive Johan Lundgren admitted the fall in the value of the pound “does have an impact” on its finances. He added that the impact will probably be smaller for easyJet than its competitors due to the company’s hedging.

Shares in the company have fallen by around 55% since the start of the year and its current price is at a more than five-year low.