Brexit uncertainty and rising costs create headwinds for Easyjet

Shares dropped following the update, with the expectation that the airliner will make a loss of £275m.

Article updated: 1 April 2019 9:00am Author: Ian Forrest

  • Despite expected turbulence we continue to recommend the shares as a ‘buy’ for investors willing to accept a medium level of risk.
  • Shares drop 7% in early trading as market reacts to latest announcement.
  • CEO states regardless of how the UK leaves the EU, they will continue to fly as usual.

Plane

The budget airline said today it expects to make a loss of £275m in the first half and said it was now more cautious on prospects for the second half of the year. Costs have risen 19% in the first half thanks in part to a rise in the price of fuel. The company cited macroeconomic uncertainty and Brexit as reasons for weaker customer demand. Despite this, revenue per seat is expected to rise after a 7.4% drop in the second half. 

Following the update shares dropped 7% in early trading as a result. While the lowering of expectations for the second half is a negative for investors, it should be noted the CEO also pointed out recent government measures means it will be flying as usual after Brexit whatever the outcome.

Our View on Easyjet - Buy

While there was always likely to be some turbulence in the run-up to Brexit, the company’s relatively strong balance sheet and opportunities for growth in Germany alongside a healthy dividend mean we continue to recommend the shares as a ‘buy’ for investors willing to accept a medium level of risk.

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All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.