Airline Investors Suffer From Brexit Chaos As Easyjet Share Price Crashes
If everyone is sick of the shambolic circus Brexit has become, investors with shares in airlines, especially Easyjet, must be among the most fed up after the budget airline’s share price crashed by almost 10% yesterday. Easyjet shares fell 9.7%, 108.5p, after a trading update warned that Brexit uncertainty is hitting demand for flights in and out of Europe.
Yesterday’s update had been scheduled for Friday but was brought forward. It stated a shift towards ‘more cautious’ forward guidance for the second half of 2019, which includes the key summer months of July and August. Chief executive Johan Lundgren stated that the “many unanswered questions” around the UK’s future relationship with Europe is resulting in “softness” in demand.
Easyjet’s candid appraisal of the impact of Brexit on its business saw investor nerves spill over across the airline and travel industry, sending share prices plummeting. Thomas Cook the package holiday operator saw its own share price hit by a 5.4% drop, Ryanair, another budget airline and Europe’s largest, fell 2.4% and British Airways 1.5%.
Economic slowdowns in Germany and France and rising fuel costs are adding to the travails of Easyjet and other budget airlines, with Lundgren pessimistically assessing “there’s no good news anywhere you look.”
Pre-tax profits of £560 million had been forecast for Easyjet but analysts now believe that could slide to as low as £400 million and the company announced a 7.4% decline in average revenue per seat over its first half.
Long term, Easyjet investors will be confident the company whose 1995 launch reshaped the European aviation industry will bounce back. The company’s management is not planning to reduce capacity in the belief that demand will return once Brexit uncertainty is finally removed. However, given recent turns of event, that could prove much longer than anticipated. Nonetheless, Easyjet’s business model and brand are well-proven and some investors will likely view the current Brexit-related troubles as an attractive, discounted buying opportunity for the company’s shares.
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