Strong trading in October was offset by an acute fall-off in demand in the wake of terrorist outrages in Egypt and Paris, says low-cost carrier Easyjet (EZJ), which slides 2.3% to £15.93 on the back of a first quarter update.

The downing of a Russian jet over the Sinai peninsula in November, followed the same month by multiple co-ordinated attacks on Paris by DAESH/ISIS saw flights to the Egpytian resort of Sharm El Sheikh cancelled while travel in Europe also suffered as more stringent airport security feeds through to disruption. 'Following a strong October, revenue per seat was impacted by events in Egypt and Paris and was down high single digits in November and December.'


That notwithstanding, trading in the quarter was broadly in line with expectations, with a better than expected cost performance offsetting revenue weakness.

At 16.1 million, Easyjet carried 8.1% more passengers while capacity grew by 7.3% to 17.8 million seats and the load factor increased by 60 basis points to 90.3%.

Savings were also made as a result of the group's ongoing self-help strategy and cost per seat decreased by 3.7% at constant currency.

The group's strong balance sheet is exemplified by the fact that cash and money market deposits were £743 million and net cash was £266 million as at 31 December 2015.

Going forward, Easyjet is maintaning a focus on capacity growth. Taking advantage of the low fuel environment the airline plans to grow capacity, measured in seats flown, by around 8% for the half year and by around 7% for the full year before the effects of disruption.

Pamure Gordon's Gert Zonneveld reckons 'the shares continue to look attractive, trading on prospective earnings multiples of 11.0x 2015/16E and 9.5x 2016.17E, and EV/EBITDA multiples of 6.7x and 5.9x respectively.

Issue Date: 26 Jan 2016