Luton airport's EasyJet's annual profits drop 14%

Luton airport's EasyJet's said this week that it's profit for the fiscal year fell 14% as the U.K. budget carrier hedged fuel needs at high prices.  But added that profits should improve substantially next year as fuel costs fall.

The airline posted net profit of £71.2 million ($119.9 million) in the 12 months to Sept. 30, compared with £83.2 million a year earlier. Revenue rose 13% to £2.67 billion from £2.36 billion, boosted namely by increases in charges made to customers to check-in baggage.

"We see a tough winter ahead," easyJet Chief Executive Andy Harrison said. "We are focussing our efforts on further cost savings and efficiency improvements together with optimizing route profitability and aircraft allocation."

The company said capacity, or the number of seats filled, for the first half of the year and full year is expected to increase by 10% compared to this year. Over the next five years, it will grow at 7.5% per annum, easyJet said, which will allow the airline to expand its European short-haul market share to 10% from 7%.

The airline has benefited from passengers trading down from legacy carriers during the recession, and has been snapping up slots that retreating airlines are leaving behind, which will allow easyJet to grow more smoothly once demand returns.

Passenger revenue per seat rose 5.9% to £40.70, but was down 1.9% on a constant currency basis. Costs per seat were higher due to lower utilization of aircraft during the first six months of 2009. While total aircraft increased by 16% during the year to 174.1 aircraft on average from 150.1 aircraft, the number of seats flown increased only 1.8%.

EasyJet, which now carries more passengers originating in continental Europe than in the U.K., is attempting to lower costs as it becomes increasingly difficult to raise fares during the economic downturn. It said it expects to deliver about £190 million in cost savings by end of its fiscal 2012, up from the £125 million of annual savings by 2011.

"To see the words 'airline' and 'profits' in the same sentence is something of a rarity in the current environment, but easyJet continues to capitalize on its no-frills offering," said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers.

Shares of easyJet lost 3.1% to 380 pence on a broadly flat London market.

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