Shares in EasyJet dip amid fears of rising costs

Shares in budget airline easyJet edged down yesterday after investors fretted over rising costs.

EasyJet - Europe's second largest no-frills carrier - maintained its guidance of a 40 to 50 per cent increase in year to end of September pretax profit, but added it also now expected capacity growth of about 13 per cent, less than previously indicated.

It also forecast unit costs to be "slightly higher" than its previous guidance of a three to four per cent increase.

UBS, easyJet's joint house broker, noted the slowing capacity increase was due to issues with crewing aircraft.

"It is not able to fly its entire fleet and is wet leasing in aircraft to handle operations," the broker added.

"This will mean higher costs and puts into question the prior leanness of operations and how much extra cost will be needed on an ongoing basis," the Swiss broker told clients, reiterating its 'neutral' stance.

EasyJet's third-quarter trading statement revealed that over the three months to the end of June, its revenue increased 34.2 per cent to £460.2 million.

This was driven by a 15.8 per cent rise in passengers carried to 8.8 million, reflecting 19 new routes and strong underlying demand.

There was also a 32 per cent increase in ancillary revenue - spending on extras such as in-flight food, insurance, hotels and car rental. The airline's load factor, a measure of how full its flights were, came in at 86 per cent, a rise of 1.1 percentage points.

In July, easyjet carried 3.17 million passengers, up 11.3 per cent on the same month last year.

It emerged last week that easyJet was considering a franchise offer from Saudi-based National Air Services, which wants to launch low-fare flights in the Arabian Gulf.

Meanwhile, Air France-KLM said passenger traffic levels rose 4.9 per cent in July from the same month last year, down from the 7.1 per cent rise seen in June, while capacity increased by five per cent over the period.

The load factor slipped to 85.2 per cent in July from 85.3 per cent last year.

Traffic growth was strongest on flights to Asia, up 10.8 per cent in July, while traffic rose by 6.2 per cent in Europe. n European airline traffic rose five per cent in June from a year earlier, with cross-border traffic in Europe growing to an 18-month high, the Association of European Airlines said yesterday.