EasyJet (EZJ ) announced this morning that its costs are to increase H2 2022 due to travel delays, supply chain issues, as well as additional crew, maintenance, and airport expenses. These factors will cumulatively result in easyJet cancelling - or as it describes it "consolidating" - around 7% of its 160,000 flights originally scheduled between July and September. Customers will be given advanced notice and an opportunity to rebook. The airline has also stated it does not intend to raise prices.
As a result of the cancellations, the company has advised that its cost-per-available-seat-km (CASK) for H2 will be near FY19 (pre-Covid) levels, specifically 87% of FY19 in Q3 and 90% of FY19 in Q4. EasyJet does not expect the cost/capacity issues to persist and expects to return to a normal trading in FY23.
EasyJet is pointing to a number of industry-wide operational issues causing the cancellations, most notably staff shortages stemming from a tighter labour market. The airline industry has not been able to rehire staff fast enough as demand has sharply rebounded post-pandemic. A spokesperson for easyJet said: "Given the unprecedented ramp up, the aviation industry across Europe is experiencing operational issues with root causes similar to the post-Covid supply chain issues being seen in many other parts of the economy.".
Gatwick, easyJet's main airport, will cap the number of flights departing during the summer season due to staff shortages. Other airports will do the same, including Amsterdam's Schiphol, another major airport for easyJet, which is cutting 16% of planned flights during the summer season.
Additionally, easyJet said it has had to turn down 8,000 EU applicants who are no longer eligible to work in the UK post-Brexit. "Pre-pandemic we would have turned down 2-2.5% because of nationality issues. Now it’s 35-40%" said Johan Lundgren, CEO. Additionally, new hires have to wait an extra month to receive their ID cards. The security check process used to take 10 weeks, now it takes 14 weeks.
Despite these hurdles, easyJet is still expected to deliver 140,000 flights and carry 22m passengers in Q3. Demand for travel in April and May 2022 has been 7 times higher than a year ago following relaxation of pandemic restrictions. The CEO added "Booking momentum has continued with demand for travel this summer remaining strong, with Q3 currently 86% sold with ticket yields up c. 2% and Q4 48% sold and ticket yields up c. 14 percent. This Q4 booking position is broadly in line with where we were at the same point in FY19."
easyJet was down 1.30% in afternoon trading, and its shares are now down 60% so far this year.
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