EasyJet shares crash on Brexit pound warning
Slump in sterling expected to wipe £105m from airline's profits this year
EasyJet shares plummeted by close to nine per cent yesterday, wiping more than £400m from the value of the company after it issued a profit warning based on the effects of the Brexit-related slump in the pound.
Revising its outlook for 2017, the company said profits would be £105m lower this year, up from previous estimates of between £75m and £90m.
At the same time, it reported "solid" trading for the final three months of 2016, including an 8.2 per cent increase in the number of passengers to 17.4 million.
Group revenues rose by 7.2 per cent in the period to £997m, says Sky News.
Despite that boost, however, earnings per seat fell 8.2 per cent, largely due to seats priced in other currencies being worth less when converted back into pounds, said EasyJet.
Sterling has fallen 11 per cent against the euro since the Brexit vote in June and has been as much as 15 per cent lower in the intervening months.
But even without the fall in the pound, says the BBC, revenue per seats would have fallen 1.2 per cent as intense competition drives down prices and rising oil prices increase costs, although the company says both are broadly in line with expectations.
In addition to the £105m hit, EasyJet says it will spend £10m setting up a subsidiary on the continent to ensure it can continue to benefit from the EU's "open sky" arrangement after Brexit.
Without this deal, airline companies based in the UK may be forced to fly in and out of the country on every route instead of being able to fly freely across the continent, says the BBC.
EasyJet says its new subsidiary will enable it to keep an EU licence, but that its headquarters will remain in Luton.