UK's easyJet sees no signs of softening demand after strong quarter

By Yadarisa Shabong

(Reuters) -EasyJet is not seeing any signs of softening demand and fares are holding up, its CEO said on Wednesday, as quarterly earnings and an upbeat outlook for its holidays business sent the budget airline's shares as much as 9% higher.

The third-quarter update was in contrast to Ryanair's warning on Monday of sliding ticket prices that sent chills across the European airline industry and deepened fears of a weak summer.

Shares in easyJet were up 5% at 1038 GMT, after it reported a 16% rise in pretax profit for the April-June quarter and said it was on track for a record summer.

Its stock, battered by Ryanair's warning on Monday, was the biggest gainer on the FTSE 100 and among the top in a pan-European index on Wednesday.

"You will have some parts of the network and some flights that are cheaper than ... last year, but some would be slightly more expensive," CEO Johan Lundgren told journalists.

"But on average, the fare environment is very similar to what we saw last year."

Airline executives at the Farnborough Airshow on Monday said the post-pandemic boom in air travel had normalised as travellers baulk at higher fares.

Lundgren said it was difficult to comment on the comparisons with Ryanair since easyJet operates head-to-head with the Irish airline on only 20% of its network.

"Given the Ryanair commentary this week on a large weakening in demand/pricing, the outlook for peak summer from (easyJet) appears to be 'ok' given the market has been expecting the worst," JPMorgan analysts said in a note.

Airline revenue per seat for the quarter was up 1% and the trend is expected to continue into the fourth quarter, easyJet said, with final quarter bookings 69% sold.

"EasyJet's pricing performance is reassuring following Ryanair’s stark fare weakness, potentially suggesting Ryanair revenue management challenges with new OTA (online travel agent) relationships as well as greater passenger pricing sensitivity in second/third tier markets," said Neil Glynn, an analyst at research firm Air Control Tower.

Second and third tier markets are smaller cities or less popular airports.

London-listed easyJet lifted the full-year profit forecast for its easyJet holidays business to more than 180 million pounds from a previous expectation of 170 million.

Lundgren, whose plans to leave next year sent easyJet stock tumbling in May, has focussed on cutting debt and restoring revenues after the pandemic, with his launch of easyJet holidays in 2019 to boost spending with the airline paying off.

EasyJet posted headline pretax profit of 236 million pounds for the three months ended June 30, from 203 million pounds reported a year earlier.

($1 = 0.7756 pounds)

(Reporting by Yadarisa Shabong in Bengaluru and Joanna Plucinska; Editing by Jan Harvey and Mark Potter)