EasyJet Profits Fall in Response to Economic Uncertainty

Budget airline EasyJet has seen its profits fall by 28% amid tough economic conditions. Chief executive Dame Carolyn McCall said that the company would remain “resilient,” despite the setback, which has largely been attributed to the economic uncertainty associated with Brexit as well as the new-found threat of global terrorism affecting what were previously popular holiday destinations.

Consumer Purchasing Power

Since the referendum in June, we’ve seen the pound drop to its lowest price in over thirty years. British shoppers will have already noticed that the price their weekly shop has been increasing. Both Typhoo and Marmite have raised their prices by as much as 12.5% to make up for the falling pound, with some supermarkets no longer able to stock certain brands. Larger purchases will have even more significant consequences. Apple recently launched a new range of laptop computers, which cost hundreds of pounds more than their previous lineup. For UK tourists, keeping on top of the latest exchange rates is even more important in determining whether they can afford to travel abroad this year. Going forward, the Bank of America expects the pound to bottom out at $1.15 during the first quarter of next year, before rebounding to $1.25 by the end of 2017.

The Brexit Affect

Not only has Brexit had a significant impact on how different people interact with their money, the company also confirmed that it is in the process of setting up a separate airline based on the European mainland to ensure the company could still operate within the EU. This comes after the company had previously stated that it had no plans to move its headquarters from Britain. EasyJet currently employs around 1,000 members of staff at its Luton airport, which it has been based in for over twenty years. As current EU flying laws may have to be renegotiated, though, the company is eager to to prepare for any situation that could occur and ensure that its day-today business remains uninterrupted. The success of no-frills airlines like this have been primarily built from short flights between the UK and popular European holiday destinations.

Threat of Terrorism

Finally, airlines like EasyJet now also have to deal with the new threat of terrorism that is becoming more prevalent around the globe. Europe’s two largest holidaymakers, Thomas Cook and TUI, both saw bookings decline over the summer. In May, Thomas Cook said that bookings this were down 5% compared to the same period last year. This year alone has seen terrorist attacks in Belgium, France, Turkey, among many other countries across the world. The threat of global terrorism and political uncertainty has had many UK tourists opting for so-called “safer” holiday destinations. According to the report by The Guardian, industry insiders told them bookings to Greece, Portugal, and Spain have seen a spike while other typically popular destinations like Egypt, France, and Turkey were on the decline.

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles by others on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com