The 2016 year end for EasyJet has not been a profitable
one, as their profits in 2016 after tax were £427m and in 2015 the profits
stated were £548m. This is a massive drop in profits as they have made a £121m
loss, however, much of this is due to the Brexit referendum as that has caused
a currency devaluation in the pound sterling and since fuel is paid in US
dollars of £3m it has not favoured EasyJet as the pound sterling is lower in
value in comparison to the dollar.

 

In addition to this, the operating profit margin
indicates a decrease from 14.68% to 10.67%, which is a drop of 4.01% in the
year to year end, even though they have had an increase in passengers of 6.6%
showing that there is no issue with demand, it falls to other aspects in which
profits have fallen, even though EasyJet profit has dropped in relation to each
£1 of sale after deducting expense it has not left the business in threating
position, but this is in no way a positive view for EasyJet. Some of the major
factors that have cause this sudden drop for EasyJet is the terrorist attack occurring
in different parts of Europe, raising concerns for people, as they will not
think it is safe to travel on plane, with such incidents occurring in Europe,
this therefore, has interfered with the number of people looking to use EasyJet
for their travelling.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

Looking at the expense ratio for the 2015 and 2016 of
EasyJet, the company has had an increase of expense by 4.01%, this again is not
a positive for the business as it means more expenses are rising for EasyJet.
The expense will have risen for a number of reason, one of them being because of
UK voting out of the European Union, causing the pound sterling to drop in
value, therefore increasing the air traffic control cost and airport and ground
handling cost throughout Europe. Due to the Brexit vote, it will cause EasyJet to
have poor cost control in coming years, until the economy has settled down with
Brexit vote. The profit before tax per seat has decreased in 2016 by 32.3% to
£6.20 per seat from £9.15 (in 2015), this a significant drop in profit per seat
totalling £2.95 per seat from the year to year end, but this can be seen as a positive
once, the currency exchange rate calms down.