Easyjet shares grounded after revealing £560m hit from Iran war
Easyjet expects to make a whopping loss in the first half of the financial year after the war in the Middle East led to major disruptions across operations.
The budget airline said on Thursday it is forecasting a loss before tax of between £540m and £560m as the industry battles against rising costs.
Shares in Easyjet tumbled some four per cent on open to 377.30p.
The London-listed firm said it had to buy near 18 per cent of its fuel in March at a time when oil prices were elevated. This alone added an extra £25m hit to the firm’s bottom line.
Oil prices have surged at staggering levels throughout the conflict amidst shortages concerns after traffic was unable to pass through Strait of Hormuz – where around a fifth of the world’s supply flows through.
Brent crude, the international benchmark for oil, surged over 25 per cent to highs of $118 per barrel in a day’s trading session – marking the commodity’s biggest one-day gain in six years.
Easyjet said for the second half of the year every $100 movement in fuel prices equates to around £40m in added costs.
Elsewhere, the airline was also on the hook for £30m in legal provisions, for which it cited “historic” cases.
Easyjet customers opt for closer to home holidays
Demand remained strong despite the disruptions, Easyjet said, with customer numbers increasing 22 per cent in the first six months of the year.
But the firm noted a significant drop-off in flight bookings to the likes of Egypt, Turkey and Cyprus as holiday-goers opted for the likes of Spain and city breaks amidst the conflict.
Kenton Jarvis, Easyjet chief executive, said: “Our first half 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.
Airlines have been among the worst struck by the US-Israeli war with Iran, with Easyjet’s Budget peer Wizz Air issuing a profit warning last month.
The Hungarian airline, which is listed on the FTSE 250, said it expects to take a €50m hit from the disruption caused by the war, leaving it likely to make a loss this year given previous guidance of between a €25m loss and a €25m profit.