Easyjet takes £200m profit hit in Iran war travel chaos
Easyjet has revealed a £200m profit hit as the budget airline battles with the soaring energy costs and falling travel demand caused by the Iran war.
The FTSE 250 carrier posted an £85m profit in the three months to June, down 70 per cent on £286m in the previous year, as passenger volume slipped by 100,000 to 25.8m.
The airline faced a 13 per cent increase in fuel cost per passenger, marking a year-on-year jump of £100m in costs.
Airlines have been facing warnings of a jet fuel shortage since war broke out in the Middle East, though Easyjet had until now played down these fears.
£100m jump in fuel costs
The airline said that, while 79 per cent of its fuel needs are provided by fixed-term contracts, every $100 per metric tonne move in the price of fuel accounts for £17m in extra costs.
The carrier said fears around the impacts of the Iran war have been causing customers to book at the last minute.
More customers are beginning to book trips for later on in the year, but these advanced bookings require more “price stimulation,” the firm said.
“We have continued to manage the impact of the Middle East conflict, and its effect on fuel prices and booking trends, during the quarter,” chief executive Kenton Jarvis said.
Easyjet said it is taking more money from in-flight sales despite falling passenger numbers. Its pre-tax profit per seat jumped by 14 per cent.
This comes after Easyjet’s stock slid up to 11 per cent on Wednesday afternoon following reports of an EU probe which could throw its mooted takeover into doubt.
The EU plans a review to “protect strategic autonomy” to ensure control of regional carriers remains within the bloc, an official told Reuters.
This potential review threw a mooted takeover of the budget airline into doubt.
Apollo takeover ‘more attractive’
Easyjet had said it was “minded to accept” a takeover bid from private equity firm Castlelake, but earlier this month agreed terms with investment behemoth Apollo on a £5.7bn deal.
Duncan Ferris, an analyst at Freetrade, said: “Given the volatility of Easyjet’s earnings, today’s update makes Apollo Management’s £7.15 per share offer look potentially more attractive to shareholders.
“However, yesterday’s news that the EU will review European airline ownership rules around foreign takeovers means the American asset management firm’s takeover plans might be stuck on the runway.”
The airline announced on Thursday that chief operating officer David Morgan has chosen to retire from his executive role, and will instead return to the cockpit as an Easyjet pilot.
Sophie Dekkers, the firm’s chief commercial officer, will succeed Morgan as chief operating officer.
“Sophie will oversee the next phase of operational development, driving productivity improvements while continuing to build on our strengthened operational performance and customer satisfaction levels,” Easyjet said.