Easyjet (LON:EZJ) has today announced its trading statement for the quarter ended 31st December 2019.
Summary
easyJet has delivered a strong performance in the quarter. The delivery of self-help initiatives, robust customer demand and low levels of competitor capacity drove outperformance in both our passenger and ancillary revenue per seat leading to an upgrade to our H1 revenue guidance. Our cost performance was in line with expectations, while our Operational Resilience programme continued to be a driving force behind a robust operational performance.
easyJet expects to deliver a first half headline loss before tax better than H1 2019.
Revenue
Total group revenue for the quarter ending 31 December 2019 increased by 9.9% to £1,425 million. Passenger revenue increased by 9.7% to £1,124 million and ancillary revenue increased by 10.8% to £301 million.
Passenger1 numbers in the quarter increased by 2.8% to 22.2 million, driven by an increase in capacity2 of 1.0% to 24.3 million seats. Load factor3 increased by 1.6 percentage points to 91.3%.
Total airline revenue per seat increased by 8.8% at constant currency, outperforming expectations. This has been driven by:
· A solid yield performance supported in particular by easyJet’s focus on initiatives to optimise late yields as well as a strong performance in Berlin, reflecting the work we have done to optimise our German network;
· Robust demand as well as low capacity growth by easyJet, as planned and low growth by competitors on easyJet’s markets;
· Continued growth in ancillary revenue per seat through better bag and allocated seating sales, as well as the introduction of a new car rental offering from our partner Car Trawler;
· Benefit from Thomas Cook administration in September 2019
Cost
easyJet’s underlying costs for the quarter were in line with expectations. Airline headline cost per seat excluding fuel at constant currency increased by 4.3% in the quarter reflecting:
· Cost per seat pressure from:
– Lower capacity growth, as planned
– Inflationary linked increases in ground handling costs, airport costs and maintenance
– Ownership costs reflecting new aircraft deliveries
– Annualisation of crew pay deals and better crew retention
– French national strikes in December which drove 813 cancellations
· Partially offset by:
– Continued focus on our cost initiatives, including the Operational Resilience programme
– Up-gauging of fleet, as easyJet continues to move from A319s to A320s and A321s
Customer and operational performance
easyJet has improved its On-Time Performance (OTP). Despite the air traffic environment remaining challenging, easyJets continues to focus on ensuring flight fulfilment and reducing severe delays for its customers. easyJet experienced 1,274 cancellations in the quarter, with 813 of those due to strikes in France in December, while delays of greater than 3 hours decreased by 21% compared to Q1 last year. This helped drive a strong Customer Satisfaction (CSAT) score of 77.4% for the quarter, an improvement of 0.5 percentage points (Q1 2019: 76.9%).
| OTP % arrivals within 15 minutes | Oct | Nov | Dec | Q1 |
| 2020 | 77% | 89% | 75% | 80% |
| 2019 | 76% | 86% | 77% | 79% |
Traffic statistics
Load factor increased in Q1 2020, as expected, with passenger growth in line with expectations.
| Oct | Nov | Dec | Q1 | |
| Passengers (million) | 8.8 | 6.2 | 7.2 | 22.2 |
| Passenger growth | 2.4% | (0.3)% | 6.0% | 2.8% |
| Load factor | 91.6% | 90.8% | 91.3% | 91.3% |
easyJet holidays
On 28 November 2019 easyJet successfully launched its holidays business, with c.700 directly contracted hotels to over 100 destinations. 85% of customers cite great value, hotel choice and website ease of use as the primary driver of booking. This flexibility, through the leading easyJet European network, has been well received with around 50% of customers to date choosing holidays spanning other than the traditional 7 or 14 nights. Our direct contracts with hotels have performed well accounting for c.50% of the bookings.
Our programme of carbon offsetting on behalf of our customers has been well received. We have seen a significant improvement in customer satisfaction as a result of this initiative, with a 7 percentage point increase from customers who are aware their flight was offset and with 11% more customers saying they will choose easyJet the next time they fly as a result of their flight being offset.
We have offset the carbon emissions from fuel used for all of our flights since 19th November. This represents 9 million easyJet customers who have taken net zero carbon flights already this year. This means that we have offset 800,000 tonnes of carbon so far.
Sale and Leaseback
As planned, to further facilitate our fleet management strategy, easyJet completed a sale and leaseback of 10 A319 aircraft in the quarter, generating £114 million in cash. The transaction resulted in a small gain on disposal which will be disclosed as a non-headline item in the income statement in the first half.
Outlook
For the year ending 30 September 2020 easyJet (excluding easyJet holidays) expects:
· Full Year capacity to grow by c.3%
– H1 to grow c.1.5% – slightly lower than the previous expectation of c. 1.7%, primarily due to French air traffic control strikes
· H1 revenue per seat at constant currency to increase by mid to high single digits – compared to previous expectation of ‘increase by low to mid single digits’
– 75% of first half seats have now been booked, which is just over 1 percentage point ahead of the same time last year
· Full Year headline cost per seat excluding fuel at constant currency to be up low single digits assuming normal levels of disruption
– H1 up mid single digits (includes an expected one-off maintenance charge)
· Full Year unit fuel bill to be between £110 million to £170 million adverse4. The total fuel bill to be c.£1.64 billion, which includes c.£25m investment in carbon offsetting
· Full year foreign exchange4 movements to have a c.£70 million positive impact on headline profit before tax and c.£25m of this movement is part of the total fuel bill
easyJet holidays is expected to be at least breakeven for the financial year ending 30 September 2020.
easyJet expects to deliver a first half headline loss before tax better than H1 2019 (H1 2019: £275m loss).
easyJet remains focused on driving future returns, positive free cash flow over the longer term and maximising headline profit per seat as it continues to deliver value for customers and shareholders.
KEY Q1 FINANCIALS
| Three months ended | 31 Dec 2019 | 31 Dec 2018 | ChangeFav./(adv.) |
| Passengers (million) 1 | 22.2 | 21.6 | 2.8% |
| Seats flown (million) | 24.3 | 24.1 | 1.0% |
| Load factor (%) 3 | 91.3% | 89.7% | 1.6ppts |
| Total revenue (£ million) | 1,425 | 1,296 | 9.9% |
| Passenger revenue (£ million) | 1,124 | 1,025 | 9.7% |
| Ancillary revenue (£ million) | 301 | 271 | 10.8% |
| Total airline revenue per seat reported (£) | 58.56 | 53.89 | 8.7% |
| Total airline revenue per seat constant currency (£) | 58.63 | 53.89 | 8.8% |
| Total airline headline cost per seat reported (£) | (58.40) | (56.71) | (3.0%) |
| Total airline headline cost per seat at constant currency (£) | (59.41) | (56.71) | (2.6%) |
| Airline headline cost per seat excluding fuel at constant currency (£) | (45.29) | (43.42) | (4.3%) |
| ASKs (million) | 26.9 | 26.0 | 3.6% |
| RPKs (million) | 24.9 | 23.5 | 6.0% |
| Average sector length (km) | 1,106 | 1,079 | 2.6% |
Commenting, Johan Lundgren, easyJet Chief Executive said:
“I’m pleased that we have made a strong start to the year with continued positive momentum. The improvement in our revenue per seat has been driven by our self-help revenue initiatives combined with robust customer demand and a lower capacity growth market.
“Cost per seat is in line with expectations, helped by our Operational Resilience programme which has not only improved overall customer satisfaction in the quarter but also enabled us to manage our costs.
“easyJet holidays launched successfully with customers looking to benefit from our unrivalled flexibility, great value and handpicked hotels.
“Being an industry leader in sustainability is important to us, and since our announcement in November we have offset the carbon emissions from the fuel used for all our flights. This means nine million customers have flown net-zero carbon flights with us and our offsetting programme has been received very positively by customers, staff and other stakeholders.
“We, of course, recognise offsetting is only an interim measure and we continue to work on reducing our carbon footprint in the short term, coupled with long-term work to support the development of new technology, including hybrid and electric planes, to reinvent aviation for the long-term.
“And I am delighted to confirm that Peter Bellew has now joined easyJet as Chief Operating Officer.”
