EasyJet warns it will get harder to pass on fuel bill

The group reported a 31.5 per cent increase in underlying profits to £248m in the year to September 30, which was at the upper end of expectations, after a sharp rise in the number of business passengers.

It said around 45 per cent of winter seats are already booked – about the same level as last year – but warned that weak consumer confidence across Europe will slow the rate at which higher costs can be passed on to passengers.

The group also announced it will trial allocated seating on selected routes in the spring, following a similar move by rival Ryanair.

The record profits for the group came after it offset a £100m increase in its fuel bill by focusing on cost controls and improved customer satisfaction levels. Its on-time performance improved by 13 percentage points to 79 per cent.

But the group warned the macro-economic environment remains challenging, while it is facing higher costs, including increased taxation and a £220m rise in its fuel costs.

As a result it is taking a “cautious approach” to expanding its fleet, which will lead to unchanged capacity in the first half of its financial year and growth of around four per cent for the year as a whole.

It expects first-half passenger revenues to increase by “mid-single digits”, helped by higher bag charges and other ancillary revenues.

The group announced payments to shareholders of £195m, which is about £5m more than previously expected amid pressure from its founder Sir Stelios Haji-Ioannou, who along with his family is a major shareholder.

EasyJet, which flies from Leeds-Bradford Airport to Geneva, said it would pay a special dividend of 34.9p on top of an ordinary dividend of 10.5p.

Sir Stelios, easyJet’s largest shareholder with 112.55 million shares, according to Reuters data, will get £51m.

The Luton-based airline has been expanding its appeal to business customers, which tend to provide higher profits, by flying more to business routes and offering flexible fares. Passengers travelling on business routes increased by one million to 9.5m in the year.

Total revenues rose 16 per cent to £3.5bn while revenues per seat were up 3.4 per cent to £55.27, helped by a rise in ancillary revenues.

Douglas McNeill, an analyst at Charles Stanley Securities, said chief executive Carolyn McCall’s first full year in charge had been a good one.

But he added: “Cost inflation looks to be greater than we had thought and pricing isn’t strong enough to compensate – the upshot is that our full-year 2012 forecasts may have to be reduced.”