Holiday bookings hit by 'unanswered questions' on Brexit, easyJet warns

By John-Paul Ford Rojas, business reporter

Easyjet has warned that "unanswered questions surrounding Brexit" are weakening demand as it heads into its key summer trading period. Shares in the low-cost airline fell 9% after it said it was now "more cautious" about its expected financial performance in the key second half of its financial year from now until the end of September. Chief executive Johan Lundgren said the carrier was operationally well-prepared for Britain's departure from the European Union but that it was seeing "softness" in the market in both the UK and Europe.

The warning also weighed on rival Ryanair, sending shares down 4% at one stage, as well as International Airlines Group - owner of British Airways and Iberia - which fell 1.5% by the close. Travel operators Thomas Cook and TUI dropped by more than 5% and 3% respectively.

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Easyjet said it was set to report a headline loss of GBP275m for the six months to the end of March, in line with its expectations over a period when travel operators traditionally struggle to turn a profit. But Mr Lundgren said the outlook for the second half was now more downbeat.

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He said: "We are seeing softness in both the UK and Europe, which we believe comes from macroeconomic uncertainty and many unanswered questions surrounding Brexit which are together driving weaker customer demand."

The airline said this was resulting in a squeeze on ticket yields - a measure of money it makes from journeys. However Mr Lundgren pointed to moves by the European parliament and the UK to be prepared for Britain's departure from Europe meaning that "whatever happens, we'll be flying as usual". He added that there had been progress towards meeting European ownership requirements - another issue that presents a headache for UK-focused airlines as they get ready for Brexit.

Easyjet said EU investors - not including UK shareholders - now owned 49.92% of the company. The airline's warning over its summer performance comes after travel operator Thomas Cook said[1] in February that "consumer uncertainty" was weighing on bookings. Easyjet's rival Ryanair - whose chief executive Michael O'Leary has been vocal in his warnings about the risks of Brexit - said earlier this year[2] that the airline "did not share the recent optimistic outlook of some competitors that summer 2019 air fares will rise".

Russ Mould, investment director at AJ Bell, said easyJet's latest warning had "sent shockwaves across the airline industry". He said: "People have been worried about the impact of Brexit on the aviation sector and there is lots of chatter that individuals are holding off from booking flights and holidays. "If you're going to hand over a large sum of money for a trip abroad, you want to be reassured that the flight will actually happen and will take off as scheduled.

At the moment travellers don't seem to have that reassurance.

"Easyjet insists that it will be 'flying as usual' whatever happens with Brexit, however these positive words may not be enough to solve its problems."

References

  1. ^ travel operator Thomas Cook said (news.sky.com)
  2. ^ said earlier this year (news.sky.com)

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