EasyJet warns profits will suffer as Iran war hits bookings and fuel prices
TL;DR
EasyJet warns that profits will decline due to the Iran war affecting bookings and increasing fuel costs by £25m in a month. The airline expects a pre-tax loss of £540-£560m for the first half of 2024-25, up from £394m previously.
Key points
- EasyJet warns of profit decline due to Iran war impact
- Fuel costs increased by £25m in the last month
- Expected pre-tax loss of £540-£560m for first half of 2024-25
- 70% of fuel needs hedged for the financial year
- Demand remains strong but customers are booking later
Mentioned in this story
The budget airline easyJet has warned the impact of the Iran war on bookings and oil prices will hit its profits, having driven up fuel costs by £25m in the last month alone.
It said it expected to report an increased pre-tax loss of £540-£560m for the six months to March, up from £394m in the first half of 2024-25. The carrier typically makes its money in the second half of the year which includes the peak summer period.
It remains confident in its fuel supply, having hedged 70% of its needs for the rest of the financial year to September.
However, easyJet said that each $100 (£74) movement in the spot price jet of fuel per metric tonne was adding £40m in costs for its unhedged supply – and currently the price is about $800 higher than before the conflict started.
Its chief executive, Kenton Jarvis, said demand remained strong in the short term but customers were leaving it later to book, owing to the economic uncertainty.
However, he said that fuel supplies were as normal and said any talk of having to cancel flights – a possibility raised by Ryanair’s Michael O’Leary for later in the summer, should the strait of Hormuz remain closed – was pure speculation. Jarvis said: “We have visibility to the middle of May and we have no concerns.”
He said easyJet saw “continued positive demand” but its financial performance “worsened year on year, impacted by the conflict in the Middle East and the competitive environment in some markets. Following our busiest Easter holiday period ever, the operational ramp up into peak summer continues as planned.”
Jarvis admitted customers were hesitant to plan ahead, with a “general shortening of the booking window as people wait till close to the point of departure to book”.
But, he added: “We’re also seeing a relatively strong late market initially in March.”
And he said “after an initial drop in places like Egypt, Turkey and Cyprus, after the drone in Akrotiri, we’ve actually seen that coming back a bit. If there is any shift, it’s a little bit away from the eastern Med and a little bit towards the western Med.”
Shares fell 3% in early trading.
Q&A
How much will EasyJet's profits decline due to the Iran war?
EasyJet expects to report a pre-tax loss of £540-£560m for the first half of 2024-25, significantly higher than the previous loss of £394m.
What impact has the Iran war had on EasyJet's fuel costs?
The Iran war has driven up fuel costs for EasyJet by £25m in the last month, with current prices about $800 higher than before the conflict.
What percentage of EasyJet's fuel needs are hedged for the financial year?
EasyJet has hedged 70% of its fuel needs for the financial year ending in September.
