Fuel costs soar, bookings shift
Easyjet has seen a £200m drop in profit for the first quarter of the year due to the ongoing challenges in the aviation sector. In the three months ending in June, the budget airline earned £85m, a 70% fall compared to £286m in the same period last year. Passenger numbers also dropped by 100,000, reaching 25.8 million overall.
The airline reported a 13% increase in fuel prices per passenger, which contributed to a £100m rise in fuel costs for the year. This, along with rising energy prices and uncertainty from the war in the Middle East, has impacted booking patterns. While many travelers are still choosing to book last-minute trips, those seeking to travel later in the year require more aggressive price reductions to finalize their plans.
Jet fuel shortage fears linger
Easyjet acknowledged that fuel costs directly impact its bottom line. It explained that for every $100 change in fuel price per metric tonne, the company faces an extra £17m in costs. Although 79% of its fuel needs are secured through fixed-term contracts, the remaining portion is vulnerable to market fluctuations.
For several months, airlines have been on alert about the possibility of a jet fuel shortage due to the heightened tensions in the Middle East. Initially, Easyjet had not taken these warnings seriously, but it now admits that the instability is influencing how customers decide to book flights. These shifts in consumer behavior are complicating the company’s planning and revenue strategies.
Apollo deal faces EU review
To offset the decline in passenger numbers, Easyjet has increased its focus on in-flight sales. As a result, pre-tax profit per seat rose by 14%. However, its stock fell by up to 11% on Wednesday after reports surfaced about an EU investigation into the ownership of European airlines by foreign entities. This development cast doubt on the progress of its £5.7bn takeover by Apollo, a private equity giant. The company had previously been negotiating with Castlelake but ultimately moved forward with Apollo in June.
Freetrade analyst Duncan Ferris suggested the EU’s review might delay the Apollo takeover. He argued that the volatility in Easyjet’s earnings could make Apollo’s £7.15 per share offer more appealing to shareholders. This is especially important as the company faces unpredictable financial conditions due to the war and fuel price issues.
Kenton Jarvis, the airline’s CEO, stated the company has been managing the consequences of the war on fuel prices and booking behavior. Meanwhile, COO David Morgan has decided to step down from his executive position and return to his pilot role. Sophie Dekkers, the chief commercial officer, will now take over as COO. She will be responsible for leading the next stage of operations, improving productivity, and enhancing customer satisfaction levels.