It’s not been a smooth ride for the UK’s airline industry. Brexit uncertainty, higher oil prices, and a weak pound - making holidays abroad more expensive - have been tough headwinds to face.
Yet today’s results from easyJet will be encouraging for investors as the budget airline announced it had raised its first half revenue guidance after beating expectations for passenger revenue.
In its Q1 2020 trading update, the company reported total revenue for the quarter rose nearly 10% to £1.43bn, up from £1.3bn in the same period last year.
Passenger numbers rose 2.8% and total airline revenue per seat rose 8.8% to £58.60, up from £53.90 in 2018.
EasyJet anticipates revenue per seat rising by “mid to high single digits” in the six months to March, thanks to improved sales in ‘extras’ such as baggage and seat allocation sales.
Investors have welcomed the improving outlook with the share price rising over 4% this morning to 1,511p. It’s been a bumpy journey for long-term investors, but more recently the company appears to be on the right path. As recently as August last year, the share price was as low as 887p, but has steadily risen since then.
The collapse of Thomas Cook airlines and strikes at Ryanair and British Airways last year provided a welcome boost to passenger numbers. The company also added more aircraft and focused on cutting costs which strengthened the share price enough to secure its re-entry into the FTSE 100 in December after a six-month relegation.
EasyJet’s move into the package holiday business will be one to watch as travel companies seek to move into the space left by the departure of Thomas Cook. While the company provided limited details of the contribution the new package holiday division is providing, it said 85% of customers cite great value, hotel choice and website ease of use as the primary driver of booking with easyJet holidays.
While the costs of fuel and ongoing consumer confidence will always be challenges airlines face, the cost to the environment is an issue they cannot afford to ignore.
With Sweden leading the way with “flygskam” or “flight shaming”, the outlook for the airline industry continues to be tough as business and leisure travellers alike think hard about whether they really need to travel by air.
In the face of a growing global flight-shaming movement, airlines around the world have stepped up plans for how they will reduce their carbon footprint. Last year, easyJet became the first major airline to operate net-zero carbon flights through an offsetting scheme, while IAG, owner of British Airways and Australian airline Qantas both committed to net-zero carbon flying by 2050.
EasyJet said its programme of carbon offsetting on behalf of customers has been well received, with a significant improvement in customer satisfaction as a result of the initiative. Since introducing the carbon offsetting in November last year, the company said 9 million easyJet customers have taken net zero carbon flights, meaning 800,000 tonnes of carbon offset.
Many will consider these actions just the start. Commenting on the environmental impact of the airline, Johan Lundgren, easyJet Chief Executive said, “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.”
After the high-profile collapse of Thomas Cook last September, Monarch’s demise in 2017 and Flybe, for now at least, only surviving thanks to government support, it’s encouraging to see some resilience in an industry facing challenges on multiple fronts.
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