EasyJet says travel security fears keeping fares lower

British low-cost airline easyJet said security fears hit demand at the end of 2015 and the pressure on ticket prices was still being felt, though a recovery was underway. Attacks in November that killed 130 people in Paris, one of the world's most visited cities, curbed demand for leisure travel just weeks after a plane crash over Egypt in October halted flights from Britain to a popular winter sun destination.
EasyJet, Europe's second-largest budget airline by passengers after Ryanair, forecast revenue per seat (RPS) would decline by a mid-single digit percentage in January-March as airlines continued to keep prices down to boost demand. Consumers were already enjoying cheaper fares as airlines passed on the benefits of lower fuel bills.
For the three-months to December 31, easyJet's RPS fell 3.7 percent at constant currencies, in line with analysts' expectations, with 2 percentage points of that decline attributed to the fall-off in demand from the Paris attacks. In the past, such attacks have only temporarily affected travel, with airlines typically cutting prices to lure passengers back. EasyJet said bookings and prices had shown a marked improvement from November and December lows, but RPS would continue to be affected as the recovery was gradual.
"We did not cut prices to the extent that some other carriers did and that was a deliberate strategy from our perspective," Chief Executive Carolyn McCall said on an investor call on Tuesday. By contrast, Ryanair slashed prices to fill its planes, its finance chief told Reuters earlier in January. Ryanair will report its quarterly RPS on February 1. EasyJet shares were down 2 percent to 1,598 pence at 1215 GMT, within a UK bluechip index down 0.2 percent.
Barclays analysts called easyJet's RPS forecast disappointing and said they saw first-half pretax profit coming in lower than expectations. EasyJet said that for the year to September 30, it was on course to meet market forecasts for pretax profit of 738 million pounds ($1.1 billion), helped by a lower fuel bill and better than expected cost-savings.
McCall said security fears about some holiday destinations, such as Turkey and Morocco, would persist and European holidaymakers would likely favour beach trips closer to home this summer. "I would say where the greatest demand will be is all the beach destinations in the Mediterranean that we are very, very strong at delivering, so actually it plays very much to our strengths," she said.