Shares in easyJet have dipped in early trading (down 0.8%).
They’re down over a third so far this year, as the Ukraine war drove up energy costs, making flying more expensive and leaving consumers with less to spend.
EasyJet says that its July operations have been “much improved”, since it removed some flight capacity due to caps at London Gatwick and Amsterdam Schiphol.
Johan Lundgren, easyJet Chief Executive, tells shareholders:
“Delivering for customers this summer remains our highest priority.
During the quarter we carried seven times more customers than the same time last year and operated 95% of our schedule. We have taken action to build the additional resilience needed this summer and the operation has now normalised.
Customers will be fervently hoping Lundgren is right, after staff shortages and soaring demand led to delays and cancellations this year (and cost easyJet £133m).
John Holland-Kaye has also rebutted criticism from Ryanair yesterday that airports messed up their ‘one job’ of hiring enough security staff and ground handlers for the summer rush.
Heathrow’s CEO tells the Today Programme that it is “bizarre” to accuse airports of not hiring enough ground handlers, as they’re employed by the airlines.
This is like accusing us of not having enough pilots.
John Holland-Kaye, Heathrow CEO, warns that it will take years for the airline industry to rebuilt after the pandemic:
We can’t ignore that COVID has left the aviation sector deeply scarred, and the next few years will need investment to rebuild capacity, with a focus on safety, consumer service, resilience and efficiency.
Airlines need to recruit and train more ground handlers; airports need catch up on underinvestment during the COVID years – at Heathrow, that means replacing the T2 baggage system and new security lanes.
And he takes a swipe at the UK’s aviation regulator for deciding that Heathrow should cut its landing fees over the next few years.
Recent months have shown that passengers value easy, quick and reliable journeys, not penny pinching, and the CAA should be encouraging the investment that will deliver for consumers.”
Good morning and welcome to our rolling coverage of business, the world economy and the financial markets.
Despite the recovery in air travel this summer, Heathrow Airport and budget airline easyJet have both reported losses this morning as the industry struggles to give all its customers a decent service.
Heathrow has posted a loss of £321m for the first six months of the year, an improvement on the £466m it lost in January-June 2021, when pandemic travel restrictions were in force.
Although passenger numbers surged to 26.1m, compared with just 3.9m a year earlier, Heathrow says it also faced higher costs. It isn’t planning to pay a dividend to its shareholders for 2022 (a wise move, given the delays and lost baggage suffered by some passengers this year).
Heathrow claims that the summer getaway has “started well”, despite having to introduce a cap on passenger numbers to avoid further travel chaos.
It insists that it started planning nine months ago for the summer peak, and that its own resources are “on track”.
We have hired 1,300 people in the last 6 months and will have a similar level of security resource by the end of July as pre-pandemic
Instead, Heathrow points the finger at airlines for problems, such as the mountain of lost baggage that built up last month. It estimates that they have just 70% of airline ground handlers compared to pre-pandemic levels, due to cost-cutting in the pandemic.
In the second half of June, as departing passenger numbers regularly exceeded 100,000 a day, we started to see a worrying increase in unacceptable service levels for some passengers; an increase in delays to get planes on to stand, bags not travelling with passengers or being delivered very late to the baggage hall, low departure punctuality and some flights being cancelled after passengers had boarded.
Rising costs and cancellations hit budget airline Easyjet’s bottom line too. It has posted a pre-tax loss of £114m for April-June, including a £133m loss due to disruption and cancelled flights.
That’s a better performance than the £318m loss in the same quarter last year.
EasyJet — one of the airlines which has struggled the most — flew 22m customers in the last quarter, up from 3m a year ago, and says:
The unprecedented ramp up across the aviation industry, coupled with a tight labour market, has resulted in widespread operational challenges culminating in higher levels of cancellations than normal.
Those cancellations means easyJet operated 95% of its planned schedule in Q3, with some customers seeing their flights cancelled at the last minute.
Also coming up today
The International Monetary Fund is expected to downgrade its global growth forecasts for 2022 and 2023 today, when it releases its updated World Economic Outlook.
Last week, IMF chief Kristalina Georgieva warned that the war in Ukraine had put more pressures on commodity and food prices, while global financial conditions are tightening more than expected, and global supply chains were still strugging.
European energy ministers will meet in Brussels today to discuss proposals to cut their gas use by 15% from August to March, with several countries having negotiating exemptions or softer rules.
Some governments, such as Spain, had opposing a blanket target, although yesterday’s news that Gazprom has cut flows to Europe highlights the growing risks of shortages this winter.
Supply fears have pushed wholesale gas prices close to their highest levels in four months, meaning consumers could face even higher bills this winter.
And this morning, a group of MPs have warned the UK government must immediately provide additional support to households, or risk millions plunging into “unmanageable” debt and damage to the economy.
European stock markets are set for a muted start, with the FTSE 100 called a little higher.
- 11am BST: CBI’s distributive trades survey of UK retailers
- 2pm BST: IMF publishes its updated World Economic Outlook
- 2pm BST: US house price index for June
- 3pm BST: US consumer confidence report for July