EasyJet Suffers Load Capacity Decrease

EasyJet has continued its rapid expansion but is doing so at a rate which means many easyJet flights are not operating at full capacity. As the low-cost airline today reported a year on year 12.4% increase in passenger numbers to 9.1 million for the last quarter of 2007, easyJet have also confirmed that its profit forecast was unchanged.

EasyJet’s rapid expansion plans include a £2 billion investment on 104 new Airbus aircraft and increased seat capacity, which at an increase of 17.7%, is growing faster than passenger numbers. A figure which of course means easyJet flights are not reaching full capacity, in fact, the budget airline’s load factor fell to 80.8 per cent% - a year on year decrease of 2.9% in January.

However, easyJet has moved to distance itself from comments circulating from the Ryanair camp this week which predicted bleak profit margins for the near future. In the same week that Ryanair reported profit falling by 27%, the Irish low cost airline said that the number could increase to as much as 50% due to a combination of rising costs, lower demand and a weaker macro environment economically. EasyJet has conceded that high oil prices would make for challenging conditions, but stopped short of re-evaluating forecasts, confirming that forward bookings were in line with expectations and that they expected load factors to improve in February and March. 

Even though easyJet has witnessed a reduced load factor, higher total revenue per passenger has been enjoyed with an increase of 1.6% to £45.76 per passenger, largely brought about by the introduction of a new checked-bag charge, which has increased from £2 per item to £3.99. This revenue increase has allowed easyJet to sustain its yearly pre-tax profit growth of 20%, up from £191 million last year. Finally, easyJet warned that the £103 million acquisition of GB Airways would mean that costs of £12 million would have to be absorbed. Approximately £7 million of this is expected to be absorbed in the first half of 2008.