easyJet the budget airline based in Britain warned its annual profit fell over 25% and suggested that trading would continue to be tough as overall fares continue falling and a weaker pound, sending shares lower by over 6%.
The drop in profit was the first since 2009. In part it is a reflection of the exposure easyJet has to destinations that have been security hit such as Turkey and Egypt and cities in France such as Nice and Paris.
That in combination with the pound dropping in value since the vote by Britain to exit the European Union this past June mean easyJet has been hit worse in 2016 than Ryanair, its Irish based larger low-fare rival.
easyJet shares fell 6.4% early Thursday morning in London, hitting their lowest in 3 years. The stock is down more than 45% in 2016, which makes it the second worst overall performer on the bluechip British 100 index.
easyJet announced that its profit before taxes would be between £490 million and £495 million, or $624 million to $629 million, through the end of last month, below the previously reduced forecast by analysts of £497 million.
The airline warned back in July of the uncertainty over the Brexit and could not give a forecast for profit as it normally does.
The weaker pound is going to result in a hit of £90 million for both 2015-16 and the upcoming financial year, after sterling dropped to its lowest price against the U.S. dollar in more than 31 years.
Carolyn McCall the CEO at easyJet said the air carrier was affected disproportionately by a disruption in 2016 and she remained confident in the company’s future.
She added that the current environment remains tough for every airline, but historical data shows that during times such as these, the strongest airlines will become stronger.
The ticket prices at easyJet dropped 8.7% during the past three months. The company is expecting that trend to remain in place into this ongoing quarter, suggesting strong competition in the short-haul European market that has been driven by the low cost of fuel and shows no sign of their being a let up.
Last month, Ryanair said that fares might fall from 10% to 12%, over the upcoming six months from September through March.
A number of industry analysts said the headwinds from currency and the low fares would prompt them to lower their forecasts for profit for the financial year 2016-17 by up to 10%.