EasyJet Opts For Bigger Planes to Contain Costs After Wider First-Half Loss

By Robert Wall Features Dow Jones Newswires

British budget carrier easyJet PLC Tuesday committed to buying larger Airbus SE planes to help lower unit costs after it reported a sharply worse first-half loss, dragged down by weakness of the British pound since the U.K. voted to exit the EU last June.

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EasyJet reported had a 192 million pound ($248 million) net loss in the six months ended March 31 compared with a GBP15 million loss the previous year. Easyjet typically makes most of its profit in the summer.

The airline said the weakness in sterling against the dollar and euro shaved GBP82 million off the bottom line. The late timing of Easter this year, a busy travel period in Europe, also weighed down on the airline's first-half performance, representing a GBP45 million dent in earnings, compared with the same period last year.

The Luton, England-based airline's first-half sales rose 3.2% to GBP1.83 billion, though per-seat revenue fell 9.7% at constant currency.

The airline it would take 30 Airbus A321neo single-aisle planes, the largest of a new generation of narrowbody airliners from the Toulouse, France-based aerospace company.

The new aircraft should help spread Easyjet's costs over more seats. The deal converts an existing order for slightly smaller A320neo planes that EasyJet is configuring with 186 seats to a model with 235 seats.

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The larger planes would allow the airline to grow its business even at airports which are operating a full capacity, EasyJet said, and save around 8% to 9% in per-seat costs.

EasyJet held off on naming the country where it would seek a European Union operating license to assure intra-EU traffic rights after Brexit. Uncertainty over future traffic rights for British airlines in the EU has hung over easyJet since the Brexit vote last year. The airline said it would have the license in place by the summer.

Despite the wider loss, easyJet struck a positive note, saying forward bookings were ahead of last year, with per-seat revenue falling less sharply and set to retreat this quarter by low single digits.

"We are seeing an improving revenue per seat trend as well as the continued reduction of competitor capacity growth," EasyJet Chief Executive Officer Carolyn McCall said.

Per-seat costs for the year should rise 1%.

-Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

May 16, 2017 02:58 ET (06:58 GMT)