EasyJet Issues ‘Cautious’ Outlook With Demand Softened by Brexit

(Bloomberg) --

The U.K.'s faltering attempt to exit the European Union is hurting demand for air travel, just as the busy summer season gets under way.

EasyJet Plc dropped the most in more than two years after warning the crucial holiday months will be weaker than expected as low-cost airlines feel the brunt of the U.K.'s political crisis over Brexit and waning consumer demand.

“We had hoped for a little more clarity and certainty around Brexit at this point,” Chief Executive Officer Johan Lundgren said on a call. That uncertainty “has been accelerated in the last four to six weeks and that clearly has had an impact on customer demand.”

The dour outlook adds another example of real-world fallout from the political infighting that has marked the run-up to Brexit, now delayed until at least April 12. From carmakers idling workers to Airbus stockpiling parts, the impact of Brexit is rippling through the economy. Business lobbies' demands for clarity have gone unheeded as politicians jostle in parliament with no agreement on the U.K.'s future trading relationship with the EU in sight.

With Europe's economy slowing, EasyJet already faced a seat glut that was pushing down prices. Revenue per seat at constant currency fell an estimated 7.4 percent in the first six months of the carrier's fiscal year, while total costs rose 19 percent, it said in a trading update on Monday.

While Lundgren declined to give an outlook for annual earnings, Bernstein analyst Daniel Roeska said the carrier's earlier indication that pretax profit would be in line with consensus of 580 million pounds ($760 million) is now out of reach.

“Investors will likely question whether other European short-haul operators are experiencing similar dynamics,” Roeska and colleagues said in a note.

Notwithstanding Brexit, Europe's low cost airlines were being squeezed by price competition and overcapacity. Wow Air Hf, the Icelandic discount carrier, went out of business last week stranding thousands of customers. Ryanair Holdings Plc also issued a cautious outlook, citing an industrywide slump in ticket prices and over-capacity across Europe this winter.

Easyjet traded 8.8 percent lower at 1,019 pence as of 11:36 a.m. in London. Shares of Ryanair, Thomas Cook and IAG SA, owner of British Airways, also declined.

To contact the reporter on this story: Lucca de Paoli in London at gdepaoli1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Andrew Noël, John Bowker

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