easyJet’s ancillary revenue grows by £1.10 per seat

Budget airline easyJet’s ancillary revenues grew by £1.10 per seat in the first half of the year to £10.23.

Published: 12 May 2010

Budget airline easyJet’s ancillary revenues grew by £1.10 per seat in the first half of the year to £10.23.

According to the airline, “this stronger than expected performance” has partly been driven by a 10.6 percent increase in bag revenue to £4.27 per seat as the company annualised some small price increases.

Ancillary revenues excluding the checked bag charge grew by 13.2 percent to £5.96 per seat.

In-flight revenue grew 12 percent in the period reflecting the successful roll out of local food offerings and electronic point of sale (EPOS).

Ancillary revenue increased by 20.9 percent to £258.3 million driven mainly by further increases in the checked bag charge.

Bag charge revenue delivered £107.7 million in the period, an increase of £17.4 million compared to the previous year; on a per seat basis, bag charge revenue increased by 13.2 percent to £5.96. Speedy Boarding and Speedy Boarding Plus has again delivered an increase in revenue, with revenue per seat in the half year of £0.45 up 9.0 percent compared to the same period last year. Total revenue from partner and in-flight activities fell by £0.6 million or 8.9 percent on a per seat basis to £1.33. T

The main drivers of this were the regulatory change to the sales process for insurance and lower hotel revenue. Income from in-flight sales on a per seat basis increased by 12.3 percent compared to the same period last year.

“Regulatory changes to the sales process for insurance products led to a reduction in insurance income of £2 million in the period. Similarly hotel and car hire revenues have also declined against a difficult economic environment,” stated the airline.

Total revenue

Total revenue grew by 13.4 percent to £1,170.7 million which, on a per seat basis, reflecting a growth of £2.23 or 5.1 percent.

Headline passenger revenue grew 11.4 percent to £912.4 million.

Strong performance despite disruption

For the six months ending March 31, easyJet shared that first half pre-tax loss decreased by £51.1m to £78.7m.

Estimated full year pre-tax profit would have been in the range of £175 million to £200 million, prior to the recent volcanic ash related disruption. This disruption has caused additional cost and lost contribution estimated at between £50 million and £75 million. Therefore, the company has revised its profit expectations for the year to a range of £100 million to £150 million at current exchange rates and fuel price.

easyJet chief executive Andy Harrison said: “easyJet will deliver substantial profit growth in 2010 through the worst recession in 70 years and even after absorbing snow and volcanic ash related disruption costs from the worst snowfall in 30 years and an unprecedented five day closure of much of European airspace. We expect to grow our passenger numbers by around 10 percent and increase both yield and load factor. This is a remarkable performance based on strong European-wide consumer demand for our low cost network of primary routes which offers the lowest prices to the most convenient airports.”

easyJet now has a 7.6 percent share of European short haul capacity up from 6.5 percent a year ago.

easyJet’s strategy is growth with margin improvement in order to achieve a 15 percent return on equity. Therefore, the management team continually focuses its efforts on both driving revenue and managing costs. Margins improved in the period driven by a unit fuel cost decrease equivalent to £80 million partially offset by lower interest income of £11 million and £25 million of lost contribution and additional cost due to snow disruption.

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