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Europe’s airlines, particularly its budget carriers, had a bumper summer in 2015, but a year later and the sector is facing a host of issues including a terror-related hit to demand, the impact of numerous strikes, pressure on ticket prices and rising fuel prices.
That’s not to say it’s going to be a bad summer for the airlines, but it’s unlikely to be as good as the last one.
Take UK-based airline easyJet as an example. When the budget carrier released its interim results in May, it said forward bookings for the key summer months were in line with last year and it was 'well placed to grow revenue and profit this financial year'. That all looks positive and yet its shares are down 18.4% so far in 2016, underperforming a 2.7% decline in the FTSE 100. That’s because the end of flights to Sharm el-Sheikh in Egypt and the impact of the Paris terrorist attacks has hit its revenue per seat. It’s not expecting a recovery until the July to September quarter.
Over at Ryanair, it’s a similar story. Last month it reported a 43% rise in net profit and a 16% rise in revenue for its last financial year. Traffic jumped again in May as it continued to add new routes. But Europe’s largest low-cost carrier said it suffered over 500 cancellations following the terrorist attacks in Brussels, while strikes in Italy, Greece, Belgium and France had caused a further 200 cancellations. It has consistently warned about pressure on fares and has pledged to lead the price war in the budget sector. Its shares are down 12.6% so far this year.