EasyJet upgraded an order for 30 Airbus SE narrow-body aircraft to the biggest A321 variant in a bet that fare declines are set to ease after pushing it to record winter losses.
The switch marks EasyJet’s first deal for the new plane, which has 49 more seats than the A320 model, previously the largest in its fleet. Deliveries start next summer, the discount carrier said Tuesday.
EasyJet is buying new planes after projecting that revenue per seat, a measure of fares, will drop by only a low single digit percentage this quarter after slumping almost 10 per cent in the fiscal first half through March 31st. That pushed the carrier’s adjusted pretax loss to £212 million (€247 million), leading its shares to decline as much as 6.8 per cent.
Some 77 per cent of seats have already been sold for the current three months, with 55 per cent booked for the fourth quarter, more than at the same time last year, chief executive Carolyn McCall said. Competitors are also reining in capacity, easing a glut in supply.
Adding the A321 is a “purposeful and strategic” move that will help EasyJet exploit opportunities presented by a bankruptcy filing at Alitalia, the break-up of Air Berlin and growth curbs at Norwegian Air Shuttle and IAG’s Vueling arm, Ms McCall said.
Sterling’s slide following last summer’s Brexit vote wiped £82 million from first-half earnings, while the discounting drive ate up savings from lower fuel costs and came as demand remained subdued on some routes following a spate of terrorist attacks on European cities and tourist centers. Easter also fell outside the period, depriving EasyJet of about 45 million pounds of profit.
Company forecasts for fiscal 2017 are in line with the market consensus, Ms McCall said. Analysts predict a pretax profit of £372 million on average, down from £495 million last year.
EasyJet said it remains on track to source an air operating certificate located in mainland Europe this summer. The carrier may need the flying rights to carry on serving routes within the European Union once Britain exits the bloc. – Bloomberg