easyJet share price down 8% on weak outlook due to Brexit

The British low-cost airline warned investors on Monday that sales volumes and prices were coming under pressure from Brexit uncertainty and slower economic growth across Europe, sending it and its rivals share prices lower.

easyJet issued a warning to its shareholders on Monday that demand for tickets had fallen and downward pressure was being applied on prices from Brexit and weaker economic growth in Europe, sending its stock and that of its rival lower.

After the issuing the warning, easyJet’s share price fell more than 8% on Monday. Meanwhile, other low-cost airlines like Ryanair and Wizz Air fell more than 2.5% and 5% respectively.

easyJet outlook unclear

Whilst easyJet will deliver H1 results in line with expectations, macroeconomic uncertainty and many unanswered questions surrounding Brexit are together driving weaker customer demand in the market, such that we are seeing increasing softness in ticket yields in the UK and across Europe. Given this uncertainty our outlook for H2 is now more cautious.

‘We are operationally well prepared for Brexit,’ easyJet CEO Johan Lundgren said. ‘Now that the EU Parliament has passed its air connectivity legislation and together with the UK's confirmation that it will reciprocate, means that whatever happens, we'll be flying as usual.’

Despite this, H2 revenue per seat at constant currency is expected to be slightly up, which reflects weakening Q3 underlying demand and an expected year on year uptick in Q4 driven by a programme of yield initiatives and an assumption of a more certain Brexit outlook.

‘For the second half we are seeing softness in both the UK and Europe, which we believe comes from macroeconomic uncertainty and many unanswered questions surrounding Brexit which are together driving weaker customer demand,’ Lundgren added.

easyJet guidance remains unchanged

The airline expects to deliver a first half performance in line with the guidance given in the Q1 2019 trading statement on 22nd January 2019, with an expected first half headline loss before tax of around £275 million.

Total first half revenue is expected to grow by circa 7.3% to circa £2.34 billion with seat capacity increasing by circa 14.5% to circa 46.2 million as easyJet continues to strengthen its position in key markets as well as completing the annualisation of its flying at Berlin Tegel airport.

Revenue per seat at constant currency is expected to have declined by circa 7.4%, in line with previous guidance of a mid to high single digit decline for the half. Underlying revenue is expected to be positive, offset by the impact of IFRS 15, the move of Easter into the second half as well as the dilutive impact of flying at Berlin Tegel and the prior year impacts from the Monarch administration and Ryanair cancellations.

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