EasyJet say demand is still strong
July 9, 2008
Even thought the economy is slowing down British holiday makers are still looking for weekend breaks and holiday trips. EasyJet reported strong demand for budget flights last month.
EasyJet is Europe’s second largest budget carrier. The airline carried nearly 38 million passengers last year. EasyJet reported a 19.5% increase in customers in June to 4.1 million.
The increase is due to a growing fleet and the recent acquisition of GB Airways. It was also the proportion of seats sold per flights (or the load factor) that showed continued strength in the short haul market. Lat months load factor, compared with the same downturn-free period last year was up by 86.9%.
Strong demand is one of the few good points to an airline industry that is struggling because of the soaring price of oil, which is threatening a $6bn loss for the sector this year. Analysts hav said that if oil prices stay at the same level, EasyJet and rival Ryanair cannot make a profit.
Toby Nicol, EasyJet’s director of communications, said fuel costs are now £20 a passenger from £10 a passenger last year. “Those airlines which are in the market this summer will have another good few months in terms of revenue, but it will not be enough to cover the costs” he said.
Analyst at stockbroker Panmure Gordon, Gert Zonnefeld said that EasyJet’s figures reflected the importance of load factors to budget airlines. Low-fare carriers keep their aircraft in the air as much as possible and filling them with as many passengers as possible. This allows the airline to gain more profits from add-ons such as car hire deals and baggage check-in fees. The average ticket prices - or Yields - are the main factors in filling up budget flights as prices are set at a low enough prices to tempt travelers looking for a bargain.
“EasyJet has yield management systems that target a level of load factor and the fares are adjusted in order to get there,” said Mr Zonnefeld. He added that once the peak summer season had finished EasyJet will struggle to pass on higher fuel costs. Profits will suffer because of this with income struggling to meet high costs. “It is difficult to see how, given that fuel prices are going up so fast, they will pass it on to the consumer. Just because we have not seen a demand slowdown yet does not mean it is not going to happen.”
See www.easyjet.com for more details on their flights.
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