Jet2 owner issues profits warning
04.10.07
Dart, the company that owns Leeds Bradford Airport based budget airline Jet2, issued a profits warning today. Its distribution arm, Fowler Welch-Coolchain, has had a 'satisfactory' first half and is trading broadly in line with last year, the company said. This implies that the problem is therefore with budget airline Jet2.
The company said that, while turnover has been well ahead of last year, margins have been lower, 'reflecting market conditions in both divisions of its business.' Half-year operating profit will therefore be significantly below last year's levels, but the outlook for the full year is 'still expected to be approaching market expectations'.
The company said that Jet2 has continued to build its network and customers with significant expansion from each of its six bases during the summer. However, margins have been reduced as new routes are developed. The airline is also likely to have suffered lower yields (average fares), as larger budget airline rivals easyJet and Ryanair held sales to try to keep their planes fill.
Dart said that Jet2's winter performance is expected to be better than last year, reflecting lower growth in capacity relative to the previous winter season, which would help profits recover such that the company could still meet its full year targets. However, this will also mean that next years growth will be lower.
Today's profits warning gives rather a different message to the AGM statement in August. Chairman and chief executive Philip Meeson said then: 'Turnover in both Jet2 and Fowler Welch-Coolchain has been at record levels in the first four months of the year. This has been achieved in part at the expense of margins, with overall performance broadly satisfactory in competitive market conditions.'
Dart shares dropped 11.75p to 74.25p in early trading. The rating is only about 10 times forward earnings but that reflects concerns over trading. They have been sliding from a peak of 136p in May.
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