LONDON – U.K.-based low-cost airline easyJet PLC Wednesday admitted it has crew shortages and ineffective rostering on some parts of its network that is hampering punctuality, an issue that has caused the airline’s founder to threaten to take away its name.
New Chief Executive Carolyn McCall, who has only been in the job for three weeks, said she would focus on improving punctuality, dealing with a wave of summer bookings and adding resources at London’s Gatwick airport in the short term as the airline faces sharp criticism for regular delays and cancellations.
Last week, lawyers for the airline’s founder Stelios Haji-Ioannou, sent a letter to easyJet threatening it with losing the right to its name if it didn’t improve its punctuality performance within 90 days. Haji-Ioannou recently resigned as a board member at easyJet but is still a shareholder and also and owns easyGroup, a collection of companies operating things like car hire, gyms and hotels. EasyJet says it hasn’t breached any conditions that would allow that Haji-Ioannou to terminate its brand license.
EasyJet said Wednesday that total operating costs before fuel and volcanic ash related costs will be up 2% to 3% per seat for the full year because the has been forced to hire four aircraft complete with staff from other airlines to cope with the shortages at a cost of GBP15 million. Air traffic control strikes in France had also added to costs, it said.
The problem is that easyJet laid off too many staff, particularly pilots, ahead of the winter season, when it traditionally cuts capacity, people familiar with the matter say.
The airline, which is more dependent on its summer routes, traditionally lets staff go and work for other airlines or take time off over the winter, and then hires them back for the busier summer months. However, they may have laid more staff off than usual last winter because of the downturn in the industry, underestimating the pace of recovery that has occurred this summer, the people said.
EasyJet countered that it faced unique issues last winter when it decided to close some U.K. bases due to the costs of using those airports, and increase operations in mainland Europe. Its problems have been worsened by an air traffic controllers strike in France, which has left planes and crew out of position and caused delays, it said.
However, Haji-Ioannou told Dow Jones Newswires Wednesday that the airline’s problems are being caused by it being too focused on summer season routes, adding that any value created during the summer was now being destroyed during the winter when aircraft are parked.
The founder, who has called on the airline to scrap plans to buy more planes as part of an expansion, said that McCall now needed to decide on how the airline would manage capacity this coming winter – whether it would look to operate with a smaller fleet over the entire year or “continue playing the flexing game.”
Easyjet said cabin crew headcount has increased to 3,580 for the week ending July 12 compared with 3,321 in the same week in 2009 after a recruitment drive over the spring, while pilot numbers have jumped to 1,793 compared to 1,677 a year earlier.
However, a spokesman for the airline admitted it is so far failing to meet its punctuality target for this year of 75% of flights arriving within 15 minutes of the scheduled time. He declined to say what its current level of punctuality is, but said easyJet achieved punctuality of 76% in 2008 and 80% in 2009.
EasyJet’s punctuality record has been questioned since the airline stopped publishing monthly punctuality statistics since April, 2009, instead only releasing annual data. It is considering reinstating monthly publication after rival Ryanair Holdings PLC (RYA.DB) used the lack of easyJet figures to publicize its own more favorable punctuality record.
Acknowledging the company has issues to sort out, McCall said easyJet is considering hiring consultants or an external facilitator to challenge established thinking and ask “a lot of questions.” It would take a “careful and considered” view on crewing levels, rostering and its internal systems to ensure everything ran more smoothly, she said.
At the weekend, the union representing easyJet pilots said they’d outlined GBP5 million of cash injections to help improve performance, including help to draw in new pilots, and a major review of pilot numbers and rostering practices.
The union had criticized Haji-Ioannou for “damaging the very brand on which his good name comes” after a number of battles between the founder and the board in recent months over strategy. Haji-Ioannou, who together with his family own about 38% of the airline, has over the past year repeatedly called for the company to start paying a dividend, halt expansion plans of its fleet and move away from a single aircraft supplier. He stepped down from the easyJet board over the dispute.
McCall said it is “absolutely our intention to resolve” the dispute with Haji-Ioannou, but confirmed the company does have contingency plans should the airline be stripped of its right to use the easyJet brand. She declined to say what the plans were.
Despite the staffing problems, easyJet said that fiscal-year pretax profit would be in line with previous guidance of between GBP100 million and GBP150 million at current exchange rates and fuel prices. The forecast includes a GBP65 million hit because of the impact of the volcanic ash disruption that closed most of Europe’s air space for over a week in the spring.
The airline said 64% of available fourth-quarter seats have been booked and it expects total revenue per seat at constant currency in the final quarter to increase by between 2% and 3%, or by 2.5% for the fiscal year.
Echoing other airlines, easyJet said trading was improving. It said total revenues for the three months to June 30 rose 5.3% to GBP759.2 million as passenger numbers rose 3.5% and total revenue per seat and per passenger also increased.
The ongoing dispute between Haji-Ioannou and the board over the airline’s fleet and dividend strategy has helped push easyJet’s share price 11% lower over the past three months. News of the staffing issues caused the stock to fall further Wednesday, and at 1304 GMT, the shares were down 6.6%, or 29 pence at 406 pence.