Easyjet shares up despite loss as it raises dividend

Added 10th May 2016

Easyjet has announced its intention to raise its dividend pay-out ratio from 40% for the year ended 30 September 2015 to 50% in H2 2016, subject to approval at its AGM.

Easyjet shares up despite loss as it raises dividend

Shares in the airline were trading up close to 2% on Tuesday as markets digested the update.

Although the company’s “full year profits were flying sky high” towards the end of 2015, the budget airline reported a loss before tax of £24m during the six months to 31 March 2016 compared with a £7m loss before tax during the same period in 2015.

The airline’s half-year report also mentioned that revenue per seat fell by 6.6% to £51.29 in spite of a 5.0% decrease in cost per seat (£51.98), motivated by lower fuel costs and foreign exchange benefit of £9m. EasyJet stated that its total fuel cost had reduced by £50m and it had experienced a 7.4% increase in passengers in H1 2016. 

The terrorist attacks in France, Belgium and Egypt were identified as the chief culprits in its lower than anticipated revenue per seat.

“Disciplined allocation of capacity, stable load factor and strong October trading were offset by the impact from external shocks to demand from terrorism events relating to Sharm el-Sheikh, Paris and Brussels,” the airline announced. These “one-off terrorism events” affected revenue per seat at constant currency by 4%, the group added.

The company also stated the decrease in revenue per seat was affected by a “weaker average Euro rate.”

UK Head of Equities, Trevor Green of Aviva Investors, the sixth largest shareholder in EasyJet, interpreted the company’s decision to increase its dividend pay-out ratio by 25% as a positive sign.

“Even with the significant headwinds including strikes by French air traffic controllers, Easyjet … is sending a clear message to investors as to the company’s confidence in the low cost carrier business model,” Green said.

EasyJet remained optimistic about its ability to continue to offer customers lower fares because of consumer resilience and demand for air travel in the face of “recent disruptive events.” The airline also stated that it anticipates the continued growth of the European short-haul market by “28.2 million seats or 5.3% year-on-year in the six months to 30 September 2016.”  

 

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