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EasyJet expects strong profits as Ryanair faces strikes

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EasyJet expects strong profits as Ryanair faces strikes

EasyJet (LON: EZJ) is expecting full-year profits to come at the upper end of expectations.

The low-cost airline said it is confident for annual and fourth quarter results following better than expected growth in passenger revenue.

“We now expect our headline profits for the year to be between £570 million and £580 million, at the top half our guidance range. This has been achieved despite higher costs caused by disruption due to third party industrial action and severe weather,” said Easyjet’s chief executive Johan Lundgren.

EasyJet is expecting its capacity to rise by 10 percent to 105 seats and flat headline cost per seat and foreign exchange rates to have a £10 million negative impact of pre-tax profit for the year of 2019.

The airline’s confidence comes as rival Ryanair (LON: RYA) prepares for strikes across six countries that will lead to flight cancellations disrupting 40,000 of its customers.

Kathleen Brooks, the research director at Capital Index, said the strikes at Ryanair are likely to cause problems for the airline later on down the line.

“The Ryanair success story has largely been built on good cash cushion and low costs – both of those things are likely to be eroded because of the labour issues and the future higher labour costs.”

“Brexit is expected to hit Ryanair’s cash flow later on down the line especially if we leave the EU without a deal. Also, we’ve got to remember logistical problems could impact a passenger backlash down the line.”

EasyJet has also said that its results were supported by the bankruptcies of Monarch and Air Berlin.

Ryanair’s share price has fallen 23 percent in a year compared to EasyJet’s eight percent rise.