Shares in budget airline EasyJet (EZJ) gained 3.3% to 954p as the low-cost carrier eyes an uptick in flying from late May onwards and said it’s able to ramp up capacity quickly if there’s a surge in demand.

Between now and the end of June the airline expects to fly up to 20% of 2019 capacity levels, anticipating levels will increase from late May onwards, and insisted it maintains ‘significant flexibility’ to ramp capacity up or down quickly depending upon the unwinding of travel restrictions and expected demand across its European network.

International travel can resume from 17 May, which is when the likes of EasyJet and tour operators such as TUI (TUI) are planning to restart holidays. Rival airline and tour operator Jet2 (JET2:AIM) however has decided to restart holidays from 24 June, citing uncertainty.

Given what it calls the ‘continued level of short-term uncertainty’, EasyJet declined to give guidance for its financial year to 30 September 2020, adding that customers are booking closer to departure and ‘visibility remains limited’.

LOSS BETTER THAN EXPECTED

It comes as EasyJet revealed in a trading update for the half year to 31 March that its headline pre-tax loss is expected to between £690 million and £730 million, which it said is ‘slightly better’ than expectations. Even in normal times airlines typically make losses anyway during the quieter winter trading months.

Revenue was down 90% to £235 million, with money brought in from ticket fares falling 91% to £165 million and ancillary revenue – extras like seat preferences and more luggage – decreasing 87% to £70 million.

Ancillary revenues are highly prized by airlines because of their stable nature unlike fares, which can fluctuate significantly, and the fact they can help drive profit margins higher.

EasyJet has been something of a laggard compared to its main rivals Ryanair (RYA) and Wizz Air (WIZZ) when it comes to ancillaries, which make up around 44% of total revenues at Wizz Air for example compared to under 30% at EasyJet.

EasyJet said ancillaries ‘represent a significant opportunity… to increase revenue per seat and margins in the coming years.’

TIGHT COST CONTROL

Helping the airline keep its losses lower than expected was tighter cost control than expected. Headline excluding fuel for the first half decreased 59% to £845 million, driven by a decrease in capacity flown and ‘material savings achieved across many areas of the business from EasyJet’s major cost-out programme.’

Total cash burn during the firm’s second quarter was £470 million, better than previous guidance, and the airline added that it’s still on track to hit its cost saving targets announced last year.

As at 31 March EasyJet had £2.9 billion in available liquidity, and once again it didn’t rule out looking at further funding opportunities.

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Issue Date: 14 Apr 2021