Cyprus Mail
Business

EasyJet and Lufthansa flag turbulent summer for airlines

Last week’s deadly attack in Nice and attempted coup in Turkey have created fresh turmoil for European airlines already grappling with the fallout of “Brexit,” with easyJet saying it was unable to give an earnings forecast and Lufthansa warning on profit.

EasyJet, Europe’s No. 2 low-cost carrier behind Ryanair, has in the past given a forecast profit range for the twelve months ended Sep 30 at this time of the year, but said on Thursday security worries, weaker consumer confidence and currency volatility were all dragging on its peak summer season.

Lufthansa said late Wednesday its core earnings for 2016 would be below last year’s, downgrading its previous forecast.

The German airline blamed repeated attacks in Europe which have dampened advance bookings for long-haul travel to the continent, plus what it called greater political and economic uncertainty since March.

Shares in Lufthansa slumped 7.5 per cent on Thursday, while those of Britain-based easyJet were down 6 per cent.

While Lufthansa did not refer to specifics, easyJet said last week’s truck attack in Nice, France, that killed 84 people, and a failed coup in Turkey, would affect its fiscal fourth quarter, though it couldn’t say by how much.

Asked whether this was the most difficult operating environment easyJet had faced since she took the helm in 2010, Chief Executive Carolyn McCall said: “Definitely. I think that will be true for all airlines over the last ten years. The reason for it is there are so many different things.”

She also cited Britain’s vote last month to leave the European Union, plus easyJet’s high level of cancelled flights due to air traffic strikes in France.

The “Brexit” vote has caused the value of the pound to fall by about 10 percent, making it more expensive for Britons to travel abroad, and prompted consumer uncertainty. Britain is easyJet’s biggest single market.

TURBULENT TIMES

Many European airlines have seen a hit to demand from a string of deadly attacks in Europe, including one last November that killed 130 people in Paris, as well as attacks in popular holiday destinations for Europeans such as Tunisia and Egypt.

In June, after the Brexit vote, British Airways-owner IAG also warned on profit.

Analysts currently expect easyJet’s pretax profit for the year ending Sept. 30 will drop 14 per cent to 592 million pounds, according to the average of forecasts.

The company’s bigger rival, Ryanair has this year also seen bookings dampened by security concerns, but at its last update in May, it was still expecting profit growth of 13 per cent for the year ending March 2017.

Ryanair has proportionately less exposure than easyJet to both France and Britain.

EasyJet also faces longer term concerns over its reliance on the EU set-up to fly the routes it does, whereas Ryanair is based in Ireland, which remains part of the EU.

Ryanair will report first-quarter earnings on July 25.

Since the Brexit vote on June 23, easyJet shares have lost a third of their value, while Ryanair’s are down 17 per cent.

Delta Air Lines Inc’s decision to sell fewer seats from the United Kingdom this winter also highlights the threat Brexit and new airline competition pose to U.S. airlines, which have raked in cash from transatlantic flights.

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