Low-cost airline easyJet has guided higher-than-expected losses for the first half of its financial year, the airline said in a trading update today (April 16).
The airline said that while demand was high, soaring fuel prices amid the ongoing Middle East conflict added £25 million of additional fuel costs in March.
easyJet said the £25 million of incremental costs was driven by the purchase of unhedged fuel for March at higher prices amid the war. The airline is 70% hedged for its second half at $706 per metric tonne.
Headline loss before tax is expected to be between £540 and £560 million for the first half of its fiscal year, ending March 31. Losses were higher than analyst expectations and, as a result, shares dropped nearly 9% this morning.
Despite this, easyJet said the result was “broadly in line with expectations” after excluding the additional fuel costs resulting from the conflict.
First-half unit costs, excluding fuel, was up around 8%. Fuel unit costs were down 5% year-on-year in the first half.
The airline said demand across the first half “remained positive” with its load factor up two percentage points to 90%. easyJet holidays saw “continued strong demand” with customer numbers up 22% in the first half.
“Despite these positives, our H1 financial performance worsened year on year, impacted by the conflict in the Middle East and the competitive environment in some markets," said easyJet CEO Kenton Jarvis. "Following our busiest Easter holiday period ever, the operational ramp up into peak summer continues as planned.”
The company said that the war has created near-term uncertainty around not only fuel costs, but also customer demand.
“As expected, the booking curve has shortened in recent weeks, resulting in lower than normal forward visibility,” said easyJet.
Third-quarter bookings are 63% sold, down two percentage points compared to a year prior. Fourth-quarter bookings are 30% sold, down two percentage points.
Ticket yields are “marginally down” in the third quarter, though “modestly up” in the fourth.
easyJet holidays is 67% sold for the second half, with full fiscal-year growth expected to grow double digits.
“easyJet's financial strength from our investment grade balance sheet and £4.7bn of liquidity mean we are all well placed to navigate current geopolitical challenges while remaining focussed on our medium term targets,” said Jarvis.
easyJet has net cash of £434 million and owns 86% of its Airbus A320neo family fleet.