EasyJet shares soar as rivals falter

Kiran Moodley, Assistant Producer
Wednesday, 24 Jul 2013 | 8:55 AM ET
Passengers queue up at the EasyJet counter at Berlin's Schoenefeld airport
Passengers queue up at the EasyJet counter at Berlin's Schoenefeld airport

A combination of additional flights on routes where rivals have cut back and the introduction of allocated seating helped boost easyJet's earnings forecast and send shares in the low-cost carrier (LCC) soaring.

EasyJet announced that total revenue for the third quarter grew by 10.5 percent to £1.14 billion ($1.75 billion), helped by a 3.6 percent increase in capacity and improvement in revenue per seat.

Shares in the company rose by 7.6 percent following the news. They were 6.7 percent higher in afternoon trading.

In a statement, Carolyn McCall, easyJet's chief executive, said: "easyJet has delivered a strong performance in the third quarter in a benign capacity environment for easyJet. The strong performance demonstrates further progress against the easyJet strategy and the commitment to deliver returns and profitable growth for shareholders."

She added that the company expects pre-tax profit for the year to the end of September to come in between £450 million and £480 million, compared with £317 million the year before.

(Read More: Ryanair Orders 175 Boeings, but CEO Wants More Seats, Less Baggage)

Since McCall took the reins in 2010, easyJet has introduced more flights between key business destinations, and recently unveiled allocated seating – an advantage for customers on LCC routes.

A cold European spring also increased advance bookings for flights to warmer climates later in the year, the company said.

Its success comes as a number of main airlines in Europe –Lufthansa,Air France and British Airways - struggle to compete with LCCs like EasyJet and RyanAir.

(Read More: Airbus's New A350 Aircraft Makes Maiden Flight)

"The three majors in Europe are having difficulty with low cost competition and with short haul,"James Halstead, managing partner at Aviation Strategy, told CNBC. "They are losing a packet on short haul operations, particularly Air France and Lufthansa. But they are trying to restructure."

"With British Airways and Iberia, they're restructuring Iberia. With Lufthansa, they're restructuring the short haul with bringing in German Wings, and Air France is trying to restructure its short haul," he added.

Halstead said that EasyJet had now become a "well-established, pan-European, low-cost, good carrier."

(Read More: The World's Fastest-Growing Airlines)

Shareholders in the company recently backed a deal for EasyJet to buy 135 new Airbus aircraft after the company's founder, Stelios Haji-Ioannou, tried to block the deal.

EasyJet will now add 35 A320s and 100 new A320neo jets to its fleet, with a possible further 100 in the future.

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