easyJet reports slower revenue growth in 1QFY2014 and predicts wider 1H loss

After growing its revenues by 11% in FY2013, easyJet managed further revenue growth in 1QFY2014 (Oct to Dec-2013), albeit at the slightly slower rate of 7.7%. Revenue per seat growth dropped from 7% in FY2013 to around 3% in 1QFY2014. The shift in the timing of Easter has prompted it to forecast a wider 1H loss, but this should not detract from an underlying solid performance. This is a seasonal business, but easyJet has managed to contain winter losses in recent years.

Nevertheless, the outlook for revenue per seat remains cautious. With load factors at consistently high levels, the scope for further growth will depend mainly on capacity. EasyJet and competitors look set to step up capacity growth in the summer schedule, although most of the legacy carriers are still cutting capacity or keeping growth low. This may increase downward pressure on easyJet's yields and unit revenues, increasing the need to continue to manage yields upwards by attracting business passengers, and developments such as allocated seating and improved website distribution.