EasyJet plc Falls Despite Announcing Upbeat Passenger Numbers

Shares in EasyJet plc (LON: EZJ) decline even though its update was positive

easyJet plc

Today’s passenger statistics from EasyJet plc (LON: EZJ) (LSE: EZJ.L) are rather hit and miss. For instance, EasyJet was able to grow passenger numbers by 5.8% to over 6.9m between June 2015 and June 2016. Further, its load factor (the proportion of plane seats which were taken) increased from 92.7% in June 2015 to 94.1% in June 2016.

However, its figures were hurt by a rise in cancellations, with issues at Gatwick, poor weather and air traffic control strikes causing the number of cancelled flights to rise from 487 in June 2015 to 852 in June 2016.

This is just one of the challenges which EasyJet is currently facing. It and other airlines such as International Consolidated Airlines Grp SA (LON: IAG) and Thomas Cook Group plc (LON: TCG) have been hit hard by a reduction in demand following the terrorist attacks in Europe and in North Africa over the last year. This has left passengers less likely to book to travel to specific destinations and in general, which is clearly bad news for easyJet’s, IAG’s and Thomas Cook’s profitability.

EasyJet has, however, had a strong twelve-month period. Today’s update shows that passenger numbers have risen on a rolling twelve months basis from 67.1m to 71.9m over the course of the last year. Further, it has been able to increase the load factor during the same period by 0.3 percentage points to 91.5%.

EasyJet currently trades on a P/E of 7.5, which is historically cheap. It is expected to report a fall in EPS in the current fiscal year due to the difficulties discussed above. But it is due to return to growth next year and so in my view it seems to be a sound buy for the long term, although its problems could remain over the coming months.

The author does not own shares in EasyJet, IAG or Thomas Cook at the time of writing.

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