Profits down for easyJet

Profits down for easyJet

Bargain breaks budget carrier easyJet has reported a profit drop of 45 per cent in the year to date until 30 September 2008. The airline recorded pre-tax profits of just over £110 million.

However, easyJet can take heart that it has not performed nearly as badly as some of its rivals in what has been a tough period for the travel industry. British Airways recently announced a catastrophic profit drop of 92 per cent.

Part of the reason for such a dramatic dip in profits has been the recent acquisition of GB Airways. Discounting the expenditure which resulted from the acquisition, easyJet recorded underlying profit before tax of £123.1 million. In comparison to the same period in 2007, easyJet was down £68.2 million, a much more acceptable 35 per cent profits drop on account of the economic downturn.

Like the rest of the airline industry, easyJet’s profits have been hit by the huge price hikes in oil prices. The company has spent £708 million on fuel so far this year, a 66 per cent increase from the previous year when £425 million was spent.

Profits are not the be-all-and-end-all for the company though. It is not unreasonable to expect a company employing an aggressive growth strategy to outlay capital (and hence reduce profits) in order to secure a larger market share.

The acquisition of GB Airways is part of a much larger operation which included expanding the fleet of aircraft by 28 planes, taking the company total to 165.

It is important to reinforce that easyJet is not in financial crisis; the airline can still call on cash reserves of £632 million should it be necessary to add further to its growing fleet.

Further acquisitions may well be on the way, with easyJet flights in October showing a healthy 18 per cent increase in traffic to nearly four million passengers. Couple this with the spate of airlines in danger of going bust, mean easyJet could benefit from a couple of cheap deals buying further aircraft.

Andy Harrison, easyJet’s chief executive said he was pleased the airline had “delivered a good trading performance”. Mr Harrison was confident of a positive 2009 for the company: “easyJet is well placed to emerge as a winner, due to our cost base, strong balance sheet, new fuel efficient fleet and the quality of the easyJet network.”

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