Here's Why 2016 Could Be easyJet's Best Year Ever
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Blaming a hit from excessive cancellations, easyJet has announced a poorer-than-expected fourth quarter of 2015 with a 3.7 percent drop in its revenue-per-seat figure during the last three months of the year.
The English low-cost carrier canceled 684 flights during the final three months of the year, many of them connected to terror attacks in Paris and Egypt. Such cancelations are not unheard of under normal circumstances, especially during the winter months. However, the number of scrapped flights in late 2015 was exceptionally high. In the fourth quarter of 2014 easyJet only canceled 468 flights.
Many of this year's cancelations came in November and December after the U.K. ordered carriers to stop flying to Sharm El-Sheikh, Egypt. The ban on flights to this popular vacation destination will reportedly now run until at least May of this year.
Negatives and positives
easyJet’s shares are down after the announcement of its lackluster quarter. However, the budget airline has a bullish outlook going forward. There are several reasons for this. First of all, even though revenue fell, both passenger numbers and capacity were up for the quarter (by 8.1 and 7.3 percent respectively). This means that demand is rising and the airline has more seats to meet that demand going forward.
Another positive is that passengers are showing a greater willingness to spend more once they already have a ticket. easyJet’s so-called “non-seat revenue” was up 12.7 percent in Q4. Fliers are perhaps becoming more willing to embrace the whole a la carte pricing trend. This acceptance is a boon for al low cost airlines.
Not as much competition as you'd expect
What about the price war with easyJet that Ryanair is hinting at as it looks to expand further into the increasingly crowded low-cost carrier marketplace? True, both airlines added 99 new services in 2015, more than any other carriers in the world. However, Ryanair and easyJet actually do not compete directly on many major routes. Both do offer services to vacation destinations (Edinburgh-Tenerife, for example), but these are limited to a few flights each per week.
A majority of the 42 competing airport pairs that both airlines serve have this kind of low-traffic dynamic. easyJet’s main routes, such as London-Barcelona (42 flights per week) and London-Rome (26 flights), are not contested by Ryanair.
A niche all their own
The main reason for this is that easyJet’s niche is slightly different than its competitor's. The London-based airline offers cheap flights to primary airports, while its Dublin-based adversary opts for secondary airports. easyJet earns more business fliers because of this strategy. Ryanair often sells itself as a cheaper option than easyJet, while easyJet criticizes Ryanair’s use of secondary airports, saying the cost of ground transport from these out-of-the-way places makes the total price of travel more expensive for Ryanair fliers.
Each airline has its following, and both have grown their passenger numbers year on year for over a decade.
The cancelations in Egypt and Paris affected easyJet as much (or perhaps more) than any other airline in Europe. Even though Egypt’s most popular destinations are off the itinerary indefinitely, so many other things are going easyJet’s way that it should be able to have a profitable year in 2016.
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