EasyJet boosted by improved pricing trends as McCall bows out

By Alistair Smout

LONDON (Reuters) - EasyJet <EZJ.L> said on Tuesday fare levels in Europe were set to rise this winter after it benefited from the woes of rivals to post record passenger numbers in the last year, prompting its departing CEO to say she was leaving the airline in good shape.

The share price was up nearly 7 percent at 1365 pence by 1138 GMT after Carolyn McCall landed her last set of results before joining British broadcaster ITV <ITV.L> as CEO in January.

She will be replaced at Europe's second-biggest budget airline by Johan Lundgren, a former executive at travel group TUI <TUIT.L>.

EasyJet's strong performance came after a tumultuous few months for the European airline industry, with Monarch, Air Berlin <AB1.DE> and Alitalia all going into administration this year.

EasyJet said that the resulting reduction in market capacity, made worse by a spate of cancellations at bigger rival Ryanair <RYA.I>, was now helping to support prices. In the final three months of 2017 the company said it now expects revenue per seat growth at constant currencies to increase by a low- to mid-single-digit percentage.

"When capacity comes out of the market, it benefits structural winners. We have taken advantage of capacity coming out," McCall told reporters, adding that she believed the airline's prospects were bright.

"You have to leave when it's on the up, and I think that it's very much on the up."

Underlying profits before tax for the year ended Sept. 30 fell by 17 percent to 408 million pounds, within a forecast range of 405-410 million pounds and largely due to a 101 million-pound hit from exchange rate moves.

Analysts are now looking to McCall's successor Lundgren to keep a tight rein on costs when he takes over on Dec. 1, when he must also quickly get to grips with the airline's planned purchase of parts of Air Berlin.

The airline said headline costs per seat were expected to fall by around 2 percent in the current financial year, before taking account of the new Air Berlin business.

Unit costs per seat increased in the last financial year by 2.4 percent to 53.52 pounds, mainly as a result of the fall in the value of sterling.

It said unit revenues per seat fell 0.4 percent to 58.23 pounds, "reflecting a currency benefit, strong ancillary revenue and increased load factors, alleviating ticket pricing pressures".

Looking ahead, the company said operations at Berlin's Tegel airport would run a headline loss of around 60 million pounds in 2018, with one-off costs of around 100 million pounds.

Much of the costs will come from leasing crewed planes to build up operations over the winter and early summer, with the first flight from Tegel expected to take place in early January.

McCall said that the transition to a new CEO would be smooth, even in this busy time for the airline.

"There are plates to spin, but they are manageable plates," she said. "It's the best time to leave a company. It's in good hands."

(Reporting by Alistair SmoutEditing by Kate Holton and Greg Mahlich)