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Travel and Transport Soaring oil prices to hit easyJet's profits
Travel and Transport Soaring oil prices to hit easyJet's profits | Soaring oil prices to hit easyJet's profits |
| Written by Sam Fountain | |
| Wednesday, 19 March 2008 | |
 Shares in budget airline, easyJet have hit some major turbulence after the carrier announced that the current 20 per cent hike in fuel costs could raise its fuel bill some £45m, impacting its previous profits forecast.
The Luton-based no-frills carrier said that despite having secured 40 per cent of its fuel for the period at a reduced price, the continued inflation of jet fuel, which has grown some 19 per cent, or $160 per tonne since the group's interim management statement in February, could impact the airline's profits for the full year. "It is unlikely such a large and immediate fuel increase could be mitigated in the short term by revenue improvements and cost actions, therefore pretax profits for the full year would be below previous guidance," the carrier said in a statement. Aside from increasing fuel costs, the carrier is performing well, with February load factors improving by 1.8 percentage points, and 27 per cent of the carrier's available seats for the Summer already having been sold. easyJet said that it expected its first half results to remain in line with pervious guidance, but that it would have trouble mitigating the increased costs in such a short time frame, and could impact its performance in the second half of the year. "First half results will be in line with our expectations," said CEO, Andy Harrison, "however it is pretty obvious that if the recent significant rise in the fuel price is maintained then our second half profits will be lower than we had previously expected." He went on to say that if costs remained high for a protracted period, that easyJet was well placed to compete, given fuel efficiency measures the company has already begun to undertake. "Of course the price of fuel will hit all airlines and we remain convinced that the combination of our new fuel efficient aircraft fleet, together with the proven strength of the easyJet business model will mean that we shall emerge as winners in a high oil price environment," he said. Competing low-cost airline, Ryanair forecast last month that fuel prices could hit its profits by up to 50 per cent over the next year, with chief Michael O'Leary adding that he hoped for the difficult climate to continue, as it would 'weed out' weaker competitors. easyJet's update has seen its shares dip considerably, falling 49p, or 13 per cent to 326p.
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