Friday, January 21, 2011

EasyJet shares dive as fuel costs, snow and anger at baggage fees threaten to double losses

Sir Stelios Haji-Ioannou accused easyJet of blaming its woes on the weather today as the budget airline took a stock market hammering for announcing that first-half losses could double.
EasyJet's largest shareholder spoke out as the carrier said December's deep freeze, rising fuel prices and airline passengers' apparent frustration with baggage check-in fees had hit business.
Shares in the airline tumbled 16.2% to 382p after it warned of poor takings from add-on charges, weak demand in continental Europe and higher-than-expected losses from snow disruption and air traffic control strikes. Announcing a £31m loss from the December freeze and union walkouts in France and Spain, easyJet said first-half losses in the six months to 31 March would range from £140m to £160m, compared with £78.7m a year earlier.
However, European airlines traditionally struggle to make money over the winter and it was the comments on revenues, both in terms of demand and add-on fees, that shocked analysts. EasyJet's chief executive, Carolyn McCall, formerly head of the Guardian Media Group, said the airline's trading performance was "solid".
Nonetheless, analysts said the earnings statement clearly unsettled some investors including Haji-Ioannou, who said easyJet would now miss his personal pre-tax profit target of £480m and reiterated warnings over its growth strategy. "The business is too seasonal for its own good and it should not blame the weather every year," he said. EasyJet's house broker slashed the airline's full-year profit estimate by 19%.

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