easyJet intends to continue to serve Spain but to do so differently by moving its aircraft to other easyJet bases around its European network which will deliver higher returns for the airline.
The Madrid base is delivering returns below all of easyJet’s other bases. This is due to a combination of over capacity in the Spanish airline market, leading to low revenue per passenger, combined with high airport charges which have more than doubled in the last two years and will be subject to further above inflation increases in the coming years.
easyJet remains committed to Spain, including Madrid, and will continue to fly to and from Spain out of its bases across Europe. While easyJet proposes to reduce its capacity to and from Madrid by around 20% in the next financial year, the reduction to and from Spain will be 7%. After the proposed changes easyJet expects to carry over 12 million passengers to and from Spain next year.
70% of passengers on easyJet’s Spanish flights start their journey from other parts of Europe and demand from these passengers remains strong. Madrid based customers will also continue to benefit from easyJet’s services after the proposed transfer as easyJet will operate to Madrid from many of Europe’s most popular cities. easyJet operates over 200 aircraft across 23 bases in the UK and mainland Europe.
The airline is now reviewing a range of options for its eight Madrid based aircraft and 310 crew. All of easyJet’s pilots and cabin crew in Madrid will be offered a job in the airline’s other bases and easyJet hopes to retain as many of its people as possible. easyJet will discuss the proposal with the easyJet European Works Council and the local employee representatives as appropriate.
Any restructuring costs arising out of this proposal will be accounted for in the current financial year. The market price of jet fuel has fallen since easyJet’s outlook statement set out in its Half Year Results statement of 9 May 2012. Assuming the current fuel price environment continues for the remainder of the year, the benefit from lower fuel prices should fully offset any restructuring costs. Consequently management expectations for profit before tax for the financial year ending 30 September 2012 remain unchanged.
easyJet expects its capacity to increase by around 5% in the year ending September 2012, compared to 2011, and to continue to grow in the next financial year. easyJet's strategy of low fares and our focus on making it easy for our customers, aligned with tight cost management and strictly managed allocation of capital, ensures that easyJet is well positioned to deliver good results for shareholders.