The boss of easyJet has denounced fines handed out to the airline and other budget carriers for charging passengers for hand luggage and seat reservations as “illegal” and warned the decision will make it more expensive to fly.
EasyJet was given a penalty of €29m (£24.2m) by Spain’s consumer rights ministry earlier this month along with Ryanair, which received the largest fine of €108m, and other airlines including Vueling, Norwegian and Volotea.
The easyJet chief executive, Johan Lundgren, who is stepping down at the end of the year after seven years at the helm, described the penalty as “anti-consumer” and insisted offering passengers paid-for extras gave them choice.
Lundgren said: “This is not consumer friendly at all because it limits customer choice, which in turn means that the base fare becomes more expensive.”
He added that the decision was against European consumer law and confirmed that the airline would appeal.
It came as easyJet reported an operating profit of £597m for the year ending 30 September, 25% higher than a year earlier, which was below analysts’ expectations.
The last set of results of Lundgren’s tenure showed that easyJet’s ancillary revenue – which includes baggage fees, seat reservations and onboard food costs – rose compared with a year earlier.
Ancillary revenue increased by 4% on the previous year to £24.45 a seat, as the company said its ancillary products led to “enhanced revenue generation through price optimisation”.
Lundgren said the increase in ancillary revenue was “driven by demand”, adding that customers would not buy the extras offered if they did not believe it was value for money.
“If you look at the overall fare, the fare increase this summer is £1,” Lundgren said.
Continuing demand for foreign travel helped easyJet to carry more passengers during the year. It flew 89.7 million passengers in the 12 months to 30 September, almost 7 million more than a year earlier when it flew 82.8 million.
The airline reported more demand for its package holidays and it expects to grow its number of holiday customers by about 25% in the coming year.
The airline said it expected to pay shareholders a dividend of 12.1p a share, up from 4.5p in 2023, which would cost it £92m, providing it is approved by investors at its annual shareholder meeting.
Lundgren will hand over the reins to Kenton Jarvis, currently the chief financial officer, on 1 January 2025, although he will stay with the business until May.
When asked about the UK budget, Jarvis revealed that the increase in national insurance contributions, which will mean employers’ NICs will rise by 1.2% to 15% from April, would cost easyJet about £13m in the first full year.
However, he argued that the government has ambitious spending plans and the move was not a surprise as it had been signposted.
Jarvis said: “The taxes will be coming, and I understand why they’ve chosen this tax area.
“I’d rather not have the £13m cost in the business but given the tax has got to come somewhere, I think it’s [a] clear place to look for it.”
He was more critical of the air passenger duty (APD) increase announced during the budget, which will add an extra £2 to the price of an economy ticket for passengers of short-haul international flights.
He said: “APD is a tax that doesn’t encourage growth, it’s a tax on the consumer and it’s a tax that airlines pass straight through to the consumer.
“Like anything, if you put the price up, and that’s what the result of this is, you should expect some softening in demand.”
