EasyJet said it was facing the most difficult summer holiday season for years after the Brexit vote hit sterling and consumer confidence dived after the recent terrorist attacks in France and Belgium and the political turmoil in Turkey.
The low-cost carrier said it has been forced to slash fares, which are down by more than 5 per cent year on year, to boost demand, while costs have surged after the pound fell 10 per cent since the UK’s decision to leave the EU.
CEO Carolyn McCall said the group is battling against the toughest period in her tenure at the helm, following two months of turbulence and the EU referendum.
She said the pound’s plunge after the Brexit vote had seen a £40m currency swing against the group, while holidaymaker confidence has also been impacted by sterling’s weakness as well as last week’s massacre in Nice and the attempted coup in popular sun-seeker destination Turkey. The group said revenues dropped 2.6 per cent to £1.2bn in its third quarter, after being knocked by traffic control strikes, runway closures at Gatwick Airport and severe weather.
The group saw 1,221 cancellations in the period, stemming from a combination of terrorist attacks, strikes, congestion and severe weather.
EasyJet has seen its stock tumble after warning last month that it would take a £28m hit to profits following two months of turbulence and cautioning that Brexit would have a negative impact.
The group is also drawing up plans to potentially move its legal headquarters out of the UK and into Europe if the Government cannot negotiate to retain the status quo in the aviation market, which allows operators to fly across the continent in a deregulated environment.
Ms McCall said it was the most challenging trading in her time in charge and “for airlines, one of the most difficult periods we have seen in a long time”.
She said the group has also been forced to promote flights in June and July – normally in high demand in peak season trading.
There have been 11 strikes in June alone, with a significant number of cancellations due to disruption.
“More recently, currency volatility as a result of the UK’s referendum decision to leave the EU as well as the recent events in Turkey and Nice continue to impact consumer confidence,” Ms McCall added.
Revenue per passenger seat on a constant currency basis fell 8.3 per cent.
EasyJet declined to give guidance on its full-year profits, but cautioned that “as a result of events in the last week, the revenue per seat trajectory in the fourth quarter remains uncertain”. Average fares fell to £60.69, down from £64.15 a year earlier.
Despite the Brexit vote, EasyJet said it remains committed to growing in the UK and does not plan to cut capacity.
Nicholas Hyett, analyst at Hargreaves Lansdown, said: “The airline sector looks set for a pretty unpleasant ride in the short term and investors might want to fasten their seat belts, because there could be turbulence ahead.”
Easyjet’s woes were in stark contrast to rival airline Jet2 which said it is confident about the future despite disappointment over the outcome of the EU referendum result.
Leeds-based Dart Group, the owner of Jet2, said it is confident that “customers will be keen to travel from our rainy islands to the sun spots of the Mediterranean, The Canaries and to European leisure cities”.
Dart Group said group revenue rose 12 per cent to £1.4bn in the year to March 31 and the current financial year has started well in both its leisure travel and distribution businesses.