Easyjet: Can the budget airline quell investors’ fear of strikes and cancellations?
EasyJet shareholders will be looking ahead with bated breath this week, with the budget airline set to unveil its third quarter trading performance on Thursday.
EasyJet shares have plateaued following a flying start to the year, with concerns peaking amid an announcement earlier this week that nearly 2,000 of its flights would be cancelled over the busy summer period.
As school’s break up for the summer, the aviation sector is entering a critical period of what is expected to be a record summer of demand, caused by a dramatic post-pandemic bounce back in bookings.
EasyJet is expecting booming revenues on the back of this surge, having already reported a £120 million improvement year-on-year in its half year trading update in April.
The low-cost carrier said at the time that demand for its flight and holiday offerings had continued to grow in the half, resulting in “a billion pound revenue improvement year on year,” as consumers flocked to buy tickets despite the cost-of-living crisis.
However, there have been fears in the industry that disruption, caused by a slew of strike announcements and airspace constraints over Ukraine, could hold back airlines recovery and cause a repeat of the travel chaos and delays that hit UK airports last summer.
Gatwick Airport – whose biggest airlines include EasyJet – was recently hit by new strike announcements from the Unite union, who said that 1,000 baggage handlers and check-in staff would walk-out in late July and early August after it balloted members.
This had followed news that EasyJet had ditched nearly 2,000 flights for the summer, mostly departing from the West-sussex hub, on the back of ongoing French Air Traffic Controller (ATC) walk-outs and disruption in the Ukrainian airspace.
Michael Hewson, chief market analyst at CMC Markets UK, said: “Travel disruption continues to be a factor determining, as well as deterring, a return to normal, nonetheless optimism remains high that easyJet will be able to see a return to profit this year.”
Hewson said that forecasts that EasyJet would hit £2.27bn in revenue for the third quarter may need to be revised, “given the amount of disruption seen so far this year due to French industrial action which also caused easyJet to cancel 1,700 flights… over the summer period.”
There are also fears within the sector that rising airfares could hit capacity figures.
“While there has been steady optimism that the travel sector will have its best year since 2019 as travel returns to normal there is also concern that higher fares could mean that capacity levels may never return to the levels we saw pre-Covid,” Hewson explained.