EasyJet warns of annual profits slump

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LONDON: British low cost airline EasyJet warned on Thursday that annual profits would slump by almost a third, hit by a Brexit-driven tumble in the pound, terror attacks and industrial action.

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EasyJet forecast annual pre-tax profits would dive by about 28 percent to between £490 million and £495 million ($624-$630 million, 556-562 million euros).

The news sent the company’s share price sliding almost 6.5 percent in early morning deals on the London stock market.

“We have been disproportionately affected by extraordinary events this year but our excellent network, cost control and revenue initiatives and our strong balance sheet underpin our confidence in the business,” said chief executive Carolyn McCall in a trading update.

On a brighter note, EasyJet also announced it had carried a record 22 million passengers in the three months to the end of September, despite what it described as “major external shocks” for the sector.

“EasyJet has performed strongly in a difficult operating environment for all European airlines and in the three month period has been affected by major disruption, exchange rate fluctuations impacting holiday travel costs, the impact on demand from terrorist events and the low cost of fuel continuing to drive increased market capacity,” it said.

The airline, which is based in Luton airport north of London, forecast that the slumping pound would hit earnings this year to the tune of £90 million. That was more than double the previous guidance of £40 million.
Sterling tumbled following Britain’s shock June 23 vote in favor of leaving the European Union.

The currency slid even further this week to fresh 31-year dollar lows after Prime Minister Theresa May vowed to kick off the Brexit process by the end of next March.

The collapsing value of the pound weighs on EasyJet’s performance because it makes dollar-priced jet fuel more expensive, ramping up the cost of running aircraft.

In morning deals, EasyJet shares slid 6.38 percent to 939 pence to top the fallers’ board on the London FTSE 100 index, which was down 0.1 percent at 7,023.78 points.

“EasyJet is facing challenging times on a number of fronts, and it’s one of the worst performing stocks in the FTSE 100 since the EU referendum,” noted equity analyst George Salmon at stockbroker Hargreaves Lansdown.

The airline will publish its annual results on November 15 for the group’s fiscal year, which runs to September 30.

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