London - EasyJet yesterday increased its dividend to 50 percent of profits in a move seen as placating vocal founder and major shareholder Sir Stelios Haji-Ioannou.
But despite the move complying with his key demand for many years, the firm shrugged off suggestions it was bowing to his concerted campaign.
Read: EasyJet gets into bread and butter
Europe's second biggest budget airline said it would raise its payout from 40 percent of the company's post-tax profits to reflect its confidence, even as it reported a larger than expected first-half loss, due to falling consumer demand after recent terrorist attacks. Sir Stelios, whose family still owns a third of the airline, called for the company to end its “scatter-gun approach” to dividends as recently as February.
But chief executive Dame Carolyn McCall said easyJet's decision to lift the payout was the right thing to do, five years after the airline began making dividend payments. “Sir Stelios has been saying this for six years, so it's not something he has just raised recently. We talk to all of our shareholders on a regular basis. We are very aware of their views.” Andrew Findlay, chief financial officer, said: “Taking our special dividends and our ordinary dividends, we have been paying out 50 per cent after tax anyway. So this regularises the situation and underlines our confidence in the business.”
Investors liked the move, sending the airline's shares up 2.72 percent to 1,510p. There was also some relief that easyJet's results were not worse. The airline warned in January that terrorist attacks were having an impact on consumers'' travel choices. Total revenue for the company was up just 0.3 percent at £1.8bn, but profits swung to a £24m loss, compared with a £7m profit last year. EasyJet said that taking out the £33m currency impact, pre-tax profits would have been at £5m.
McCall said while it had been a difficult first half for the company, with attacks in Paris and Brussels, she predicted it would do very well in the full year. Analysts have pencilled in full-year pre-tax profits of £721m. “This half has had external events that we haven't seen like this for over a decade. Despite that we have grown passengers [numbers], forward bookings are level with last year and we had the best ever ski season.”
One way airlines have encouraged passengers back to flying has been to cut fares. Fuel cost reductions are also being passed on. “If you are a consumer it's a very good time to fly. Fares are six percent down and are at the lowest they have been since 2011,” said McCall.
Mediterranean destinations are set to do very well this summer as holidaymakers switch away from Egypt and Turkey to Italy, Portugal and Spain.
THE INDEPENDENT