EasyJet profits surge as new strategy pays off

Updated: 
While Ryanair warns of a profits rough landing (twice, in fact) and attempts to become 'friendlier', easyJet are flying high: the Luton-based airline confirmed this morning it made £478m in full year pre-tax profits. More than 50% up on 2012.

Led by boss Carolyn McCall (pictured), what is easyJet doing right that chief rival Ryanair isn't?

Plane dealing

Treating its customers with a measure of respect, might be the answer some want to hear. The truth is complex. In recent years easyJet has been quietly upping flights on routes that rivals have pulled away from, as well as upping its business offering (commercial travel is up sharply following the 2008 financial crisis).

Allocated seating and other on-board tweaking has also aided. EasyJet has also picked up market share from European regional and national legacy operators that have hit turbulence, soaking up left-over capacity. Last year easyJet made a profit of £4.81 per seat. That figure climbs to just over £7 for this year.

The benefits for shareholders are considerable: a £300m windfall thanks in part to on-going commitment to paying regular dividends. Not just dividends, either; easyJet's share price has almost doubled in the last 12 months.

New planes

New, more economical planes (135 new Airbuses) are on order - a move that saw easyJet founder Sir Stelios Haji-Ioannou slash his shareholding on fears the company was over-extending itself - should cut operational costs further.

"Our disciplined approach to capacity allocation," says chief exec Carolyn McCall, "has resulted in a meaningful growth in earnings, profit margin and return on capital employed and we have ended the year with a strong balance sheet and a low level of gearing."

Bear in mind that on many flights easyJet and Ryanair cannot be accurately described as 'budget' airlines given the eye-watering fees plastered onto prices. You need to stick to the carry-on rules to keep the cost of a ticket down.

O'Leary factor

The impact of easyJet's growing success hasn't been lost on Michael O'Leary. If you fly with Ryanair from this month you now have a 24-hour grace period to correct any booking errors, and from December you can bring a second, smaller carry-on bag.

But such small concessions will come too late in the day for many fliers. Don't let your guard down on the charges front, more broadly though. You can still pay huge sums, especially for bags stowed in the hold.

10 biggest companies in the world

10 biggest companies in the world