Expansion costs push easyJet to £48m loss

The no frills airline easyJet plunged nearly £50m into the red yesterday after paying for its expansion plans and after it slashed fares in order to keep passenger numbers up after the slump in the travel business.

The airline revealed it had made a £48m pre-tax loss for the first six months of its financial year, hampered by the acquisition costs of its £374m purchase of Go and by rock-bottom flight prices. Its figures were also hurt by the late timing of Easter, which had fallen in its more profitable second half.

In February the company said reduced prices would hit revenue growth - the average easyJet fare is now £34.77, down 10 per cent on last year's average. Shares in the company closed up nearly 5 per cent yesterday at 196.5p on relief that easyJet's performance had not slipped further.

The airline carried 9.3 million people in the past six months, a 40 per cent increase on the numbers that travelled in the same period a year earlier. Revenues were up 25 per cent to £373m and the company's load factor, the proportion of the aeroplane it fills, was up 1.1 per cent at 82.2 per cent.

War in Iraq and the outbreak of severe acute respiratory syndrome have put pressure on airlines to maintain passenger numbers. British Airways is struggling to compete with the low cost airlines on some routes. It revealed a 2 per cent drop in passenger numbers in April and the number of business and first class travellers dropped by more than a quarter.

But easyJet's cheap ticket policy has had some success with passenger numbers in April up 34 per cent to 1.7m.

Chris Walton, easyJet's finance director, said: "People are still travelling, the war and Sars notwithstanding. We are continuing to grow and are still bringing out new aircraft, while some of the larger airlines are grounding theirs."

Mr Walton was cautious, however, about the outlook for a huge upturn in the travel market over the summer. "We still see fares being a little softer than last year. Bookings for May appear so far to be in line with last year, but the visibility beyond that is much poorer. Our promotions will continue, as we want to encourage people to travel. We will just have to bring our costs down to make up for lower revenues."

The company said it was cutting a further 50 jobs, mainly middle managers, through the acquisition of Go, but Mr Walton said this would be the last of its merger redundancies. The six-month loss included £18m of charges for integrating the two businesses and the company also spent £9.2m on its aborted attempt to buy Deutsche BA ­ the German division of British Airways.

EasyJet is now facing increasing competition from Ryanair. Yesterday the Irish carrier offered customers the chance to win 1,000 free tickets for every ¤1m lost by easyJet in the past six months. This week it takes over the flight routes acquired through Buzz, which it bought last month.