British airline EasyJet has spurred hopes of a lucrative reward to shareholders, giving an increased forecast for upcoming full-year earnings in the latest indication of the success of its low-cost model.
EasyJet’s cheap fares have helped it and rival Ryanair weather an increasingly competitive European short-haul market, while traditional airlines have struggled to compete.
The trend has been highlighted by a recent two-week strike by pilots at Air France, part of Air France-KLM, over issues relating to a new discount airline, which helped propel some customers to rivals such as easyJet.
Revenue per seat would be 1.5 per cent higher than last year
The company said it expected to report a pretax profit in the range of £575 million to £580 million, as much as 6 per cent more than guidance given in July.
The raised forecast put EasyJet, Europe’s second-largest low-cost carrier behind Ryanair, on track to make its largest-ever ordinary dividend payout, after it said in September it planned to reward shareholders with 40 per cent of pretax profit, above the previous one-third distribution.
“We think that easyJet will continue to take market share from the flag carriers in key markets such as Germany, France and Italy as these companies attempt to restructure their own short-haul operations,” said analyst Robin Byde at brokerage Cantor Fitzgerald, who has a “buy” rating on the stock.
Byde added he believed there was a significant chance of easyJet announcing a special dividend at the time of its full-year results on November 18.
Analysts at Jefferies said a special payout could also be on the cards: “A £100 million special dividend is possible in November, but more likely in full-year 2015.”
The higher than expected results for the 12 months through September were helped by a £5 million pound boost to revenue from the Air France strike as customers switched to EasyJet’s planes.
Earnings were also helped by strong demand for short-haul European travel at the end of the summer, meaning revenue per seat on a constant-currency basis would be 1.5 per cent higher than last year in its fiscal fourth quarter.
In recent years, EasyJet, whose orange logo is a common sight at its Luton, southern England, base, has added flights on routes where rivals have cut back and introduced more flights between top business destinations.
It said profit would also be lifted by lower than expected unit fuel costs and favourable exchange rate movements in the six months to the end of September.