Hard times ahead for EasyJet

Fasten your seatbelts - the budget airline is to cut flights and has slammed the brakes on fleet expansion.

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Last Updated: 31 Aug 2010

The budget carrier founded by EasyEverything entrepreneur Stelios Haji-Ioannou will cut capacity at its third largest UK base, Stansted,  by 12% over the winter – that’s about 250 flights that won’t be leaving the tarmac. It has also halved its planned overall capacity growth to early next year to between 4% and 6%. It won’t push back any of its orders for new planes – it's due to receive 18 Airbus A319s next year – but may get rid of as many as 45 older or leased aircraft depending on market conditions.

The cutbacks have been made in response to rising oil prices, said a spokesman – the airlines annual fuel costs having grown by some £185m so far. Although revenues and passenger numbers both showed good growth, EasyJet’s share price dropped 3% on the announcement.

Following on as it does from Ryanair’s decision earlier this month to cut a similar number of flights over the coming winter, the news has led analysts to suggest that the low-cost business model has hit its growth ceiling, which would certainly be more bad news for already battered investors.

But given that our eco-consciences have been telling us that we really need to fly less for years, here at MT we can’t help thinking that from a macroeconomic perspective this isn’t entirely a bad thing. The rate at which the oil price has been rising has certainly caused a lot of short term pain, and will continue to do so. But if the end result is that we all get used to using less of the black stuff, that’s a long term gain that’s really worth having.

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