EasyJet Profit Jumps but No Special Dividend Yet: British Budget Carrier’s Profit Rises 22% on a 6.3% Gain in Revenue

The Wall Street Journal
By Robert Wall
Updated Nov. 18, 2014 5:14 a.m. ET


LONDON—EasyJet PLC said falling fuel costs and improved bookings should underpin its business in the months ahead after reporting a 22% rise in full-year profit. The British budget airline benefited from flying more business travelers and strikes at rival carriers.

EasyJet, Europe’s second biggest discount carrier, still disappointed some investors by not declaring a special dividend despite the more generous payout policy it announced earlier this year. The stock was down nearly 2% in early trading, the leading loser among FTSE 100 shares in London.

“Our performance demonstrates our continued focus on cost and progress against every strategic revenue priority,” Chief Executive Carolyn McCall said.

But the time wasn’t yet ripe for an extra payout to shareholders, Ms. McCall said on Tuesday.

The airline has exceeded a target of holding £4 million ($6.3 million) of cash per aircraft, but at £4.4 million, the extra margin isn’t enough to warrant a special dividend, she said.

Some analysts do expect the airline to pay out more cash all the same. A special dividend of £250 million is on the cards, said Nomura’s James Hollins.

EasyJet said it does propose to pay an ordinary dividend of 45.4 pence per share. The carrier earlier this year said it would pay shareholders 40% of after-tax profit for the year rather than 33%.

The British carrier said on Tuesday that pretax profit for the year ended Sept. 30 rose to £581 million, slightly ahead of management’s forecast of profit of as much as £580 million.

Net profit rose to £450 million on a 6.3% rise in revenue to £4.5 billion, as easyJet picked up passengers from Air France which had to cancel flights in September because of a strike by pilots. Industrial action has also disrupted flights at Deutsche Lufthansa AG this year.

Europe’s two biggest discount airlines, easyJet and its larger rival Ryanair Holdings PLC, have continued to enjoy strong bookings as they take business from network carriers like Air France and Lufthansa and target higher-paying business passengers. Ryanair this month raised its full-year profit forecast for its financial year ending in March.

For the current year, easyJet said capacity should grow 5% with forward bookings for the weaker winter season running ahead of last year’s pace.

Revenue per seat in first half of the year will be flat or slightly higher compared to the year prior on a constant currency basis, the airline said.

Fuel costs could fall as much as £70 million, countering a projected 2% rise in unit costs, excluding swings in fuel prices and exchange rates.

The budget carrier said it has been testing a frequent-flier program on 15,000 passengers offering increased booking flexibility and price guarantees.

The program will gradually be expanded, Ms. McCall said.

Luton-based easyJet said back in September said it would purchase additional Airbus Group NV A320 single-aisle jets to support growth in the coming years.

- Source:  http://online.wsj.com