Budget airline warns on profits

Low cost airline easyJet says its profits for the second half of the year will be down if fuel prices stay high, but the no frills carrier is performing well so far this year.

easyJet, which is based at Luton airport, says flight sales for Easter are on track. The low fares airline also reports that it has sold around 27% of its seats for the summer holiday season, which is slightly ahead of last year. And it says the positive outlook for total revenue per seat in the second half of the year remains unchanged.

“First half results will be in line with our expectations, 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,” comments easyJet chief executive, Andy Harrison.

When easyJet made its Interim Management Statement on 7 February this year the forward price for jet fuel for summer 2008 was $840 per tonne. That price has now risen to over $1,000 per tonne.

“If current prices were to be maintained there would be an additional second half fuel cost of around £45m, despite easyJet having 40% of its fuel requirements hedged at $750 per tonne,” the airline says in a press statement.

easyJet believes that such a large increase in fuel costs would not be mitigated in the short term by revenue improvements and actions to cut costs.

“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,” concludes Harrison.

Written by: Nick Purdom