May 10, 2007

EasyJet shares continue dive

LONDON (Reuters) - Low-cost airline easyJet’s shares suffered a fourth day of losses on Wednesday, after it said passenger numbers were being hit by higher taxes and interest rates, and as rival Ryanair launched a price promotion.

EasyJet said it had more than halved its traditional first-half loss, meeting analysts’ expectations.

But its shares fell 5.5 percent by 2:53 p.m. (British Time), continuing a fall that started last week when rivals Ryanair and British Airways reported soft April trading.

EasyJet said it would try to offset the weaker market by lowering ticket prices and increasing promotions in the second half.

But Ryanair moved first, offering its biggest-ever promotion of 10 million seats over 5 weeks for little more than the cost of the airport tax.

"We continue to see pressure on yields in the summer," said easyJet Chief Executive Andy Harrison.

"Maybe a little is due to air passenger duty, maybe people are feeling the increase in interest rates, maybe at the margins some people are not flying due to the environmental debate," he told reporters.

Britain doubled air passenger duty in February, citing the need to tackle climate change and taking the tax on short-haul flights to 10 pounds.

EasyJet’s shares have fallen by about 19 percent in total since last Thursday, when Ryanair said the new taxes were hitting yields. EasyJet echoed those comments on Tuesday, saying revenue per seat had fallen in April.

"Today provides little new to calm the bears, who remain convinced that there will be a profits warning in June due to deepening weakness which management can’t see today," said analyst Chris Avery at JP Morgan.

EasyJet’s first-half pretax loss was 17 million pounds in the six months to March, down 58 percent from 40 million last year.

By Pete Harrison

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