Easyjet: Giant brings back dividend but share price falls on lower profit guidance
Shares in Easyjet fell more than five per cent today, despite a bullish trading update which saw the carrier reinstate its dividend and announce a fresh Airbus aircraft order.
The low cost airline said it had placed a firm order for 157 new Airbus aircraft, taking its order book to 315 ahead of 2034, and with the purchasing rights for a further 100.
It came after Easyjet swung to profit in its trading update this morning, netting £450m in the 12 months to September, up from a loss of £178m the prior year.
Soaring demand saw the budget carrier break records over the summer, with fourth quarter profits expected to come in at around £650m to £670m.
But the booming run was not enough to stop its full year profit guidance falling below analysts expectations to between £440m and £460m, causing investors to fret over performance in the typically quieter winter months.
It flew 28.6m seats between July and September as pent-up demand following the pandemic swept through aviation. Load factor – the proportion of available seats bought by customers – also held strong at 92 per cent.
Easyjet intends to pay shareholders a dividend of 10 per cent of its 2023 full year profit after tax, which could rise to 20 per cent in 2024 based on performance.
Johan Lundgren, CEO of easyJet, said “We have delivered a record summer with strong demand for easyJet’s flights and holidays with customers choosing us for our network, value and service. This performance has demonstrated that our strategy is achieving results.”
“Our new medium-term targets provide the building blocks to deliver a PBT greater than £1bn, this will be driven by reducing winter losses, upgauging our fleet and growing easyJet holidays.
Lundgren said the aircraft order would “enable easyJet’s fleet modernisation and growth to continue beyond 2028 while providing substantial benefits including cost efficiencies and sustainability improvements.”
Easyjet’s share price has dazzled this year, with stocks currently up 53.46 per cent at 107.52p.
Yet there are future threats in the form of French air traffic controller strikes, which forced Easyjet to axe 1,700 summer flights in July, and airspace disruption in the UK.
Easyjet’s primary hub Gatwick has warned of air traffic control staff shortages in its tower, following the system-wide failure at the UK’s National Air Traffic Service (NATs) in August.
Rising oil prices could also temper its outlook, with fuel costs rising just over £1bn year-on-year, and further jumps likely due to the emerging conflict int he Middle East.
John Moore, senior investment manager at wealth manager RBC Brewin Dolphin, said: “easyJet’s trading statement presents a largely positive picture, following a busy summer season, and the purchase of aircraft shows confidence in the long-term future.”
“However, in the short term, headwinds in the form of the cost of living and higher interest rates are likely to continue to impact people’s holiday plans as we look towards the end of the year.
He added: “To get through the short-term turbulence easyJet must remain focused on tight financial metrics and re-enforcing brand reputation which is a difficult balancing act as customer ire at flight schedule changes shows only too well.”