EasyJet issues profit warning

Mar 20 2008 by Bill Gleeson, Liverpool Daily Post

BUDGET airline EasyJet is bracing investors for lower profits after warning of a potential £45m hike in fuel costs.

Chief executive Andy Harrison said the recent “unprecedented” rise in fuel costs would impact on second half profits if maintained.

Crude oil prices have reached a series of record highs in the past month, hitting $112 a barrel this week.

The price has risen more than $20 in the past month alone.

EasyJet, which has a major base at Liverpool John Lennon Airport, said forward prices for fuel had risen from $840 per tonne to $1,000 per tonne since February 7. If prices remain at this level it will add £45m to its second half costs from April 1.

Mr Harrison said: “First half results will be in line with our expectations, however it is pretty obvious that if the recent significant rise in fuel price is maintained then our second half profits will be lower than we had previously expected.”

Oil prices have eased slightly to around $108 a barrel after reaching Monday's $111.80 high.

They have spiked in recent weeks amid fears over global economic uncertainty, with investors switching funds from currencies and equities to commodities such as oil.

No-frills airline EasyJet said it was unlikely to be able to combat the rising cost of oil through “revenue improvements and cost actions”.

The airline, which carries around 37m passengers a year, said February load factors were up 1.8% year on year to 84.8%. It also said 27% of summer seats had been sold, slightly more than this time last year.

EasyJet earned profits of £201.9m during the year to September 30 2007, and last month predicted a 20% profits hike for this year.

The company’s warning over oil costs follows a similar one from low-cost rival Ryanair last month.

The Irish firm said a “perfect storm” of higher oil prices and weaker consumer demand could see profits fall.

Shares in EasyJet yesterday closed down 10% at 339.25p.