EasyJet warns on profit hit from French air strike, shares slide

EasyJet (EZJ.L) shares fell 8% after the low-cost carrier warned its annual profit would be impacted by a roughly £25 million hit from a French air traffic control strike and rising fuel costs, despite reporting Q3 pretax profit of £286 million, in line with expectations. While demand for budget flights remains strong, the airline noted a trend of later bookings amid worsening macroeconomic sentiment, though it anticipates continued 'good profit growth' for the year, with the final outcome dependent on late summer bookings and associated yields.

Analysis

EasyJet's (EZJ.L) shares declined 8% following a profit warning for the fiscal year, which the company attributed to a £25 million impact from a French air traffic control strike and rising fuel costs. Despite this revised outlook, the carrier reported a solid third quarter with pretax profit rising approximately £50 million to £286 million, in line with expectations, demonstrating resilient underlying performance. However, management noted a persistent trend of later consumer bookings, linked to macroeconomic uncertainty and European heatwaves, which introduces a degree of unpredictability for the crucial late summer season. While some analysts are cutting forecasts, peer context from Bernstein suggests EasyJet remains a relatively stable operator, describing the quarter as "reassuringly surprise-free" compared to rivals. The final full-year outcome remains dependent on late bookings and yields, with 67% of fourth-quarter capacity already sold, and the company plans to issue new mid-term targets by year-end.

Key Decisions for Investors

• Investors should recognize that the 8% share price decline reflects the market pricing in the £25 million profit hit from external, one-off factors like the ATC strike.
• Consider the company's relative stability and in-line Q3 operational performance against the sector's volatility; the current weakness could be an entry point for those with a higher risk tolerance for external headwinds like fuel costs and industrial action.
• The key variable to monitor is the strength of late summer bookings and yields, as this will determine the final full-year performance and validate management's expectation of 'good profit growth'.
• Look ahead to the new mid-term targets due at the end of the year, which will provide a critical update on the company's strategic direction and long-term financial objectives.