Owner of Jet2 issues profits warning
04.10.07
Dart Group, the owner of Leeds Bradford Airport based budget airline Jet2, issued a profits warning today. In it the company said its distribution arm, Fowler Welch-Coolchain, has had a 'satisfactory' first half and is trading broadly in line with last year. This seems to say that the problem is therefore with budget airline Jet2.
In the statement, the company said that, while turnover has been well ahead of last year, margins have been lower, 'reflecting market conditions in both divisions of the business.' Half-year operating profit will therefore be significantly below last year's levels, but the outlook for the full year is 'still expected to be near market expectations'.
The company said that Jet2 has continued to build its network and customers, with significant expansion from each of its 6 bases during the summer. However, margins have been reduced as new routes are developed. The airline is also likely to have suffered lower average fares (yields), as budget airline rivals easyJet and Ryanair held seat sales to fill their planes.
Dart said that Jet2's winter performance is expected to be better than last year, reflecting lower growth in capacity compared to the previous winter season. This will help profits recover such that the company could still meet its full year targets. However, it will also mean that next years growth will be lower.
Today's profits warning gives a different message to the AGM statement in August. Chairman and chief executive Philip Meeson said then: 'Turnover at both Jet2 and Fowler Welch-Coolchain has been at record levels in the first 4 months of the year. This has been achieved in part at the expense of margins, with overall performance broadly satisfactory.'
Shares in the company dropped by almost 15% - 11.75p to 74.25p - in early trading. They are trading at about 10 times forward earnings, which reflects market concerns over trading. They have dropped by almost 50% from a peak of 136p in May.
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