Oil prices force EasyJet to cut its full-year profit outlook

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UK budget carrier EasyJet is warning it is unlikely to hit its outlook for 20% full-year pre-tax profit growth if fuel prices continue to rise at current levels.

In February EasyJet forecast that its interim pre-tax margins – excluding the impact of its acquisition of GB Airways – would decline by two to three percentage points, largely due to increased fuel costs. For the full-year the Luton-based carrier maintained its forecast for 20% underlying pre-tax profit growth.

But EasyJet says the summer 2008 forward price for jet fuel has since risen from $840 to $1,000 per tonne. Although it has 40% of its fuel needs hedged at $750 per tonne, the budget carrier warns that if prices continue to rise it will take an additional £45 million ($90 million) second half hit.

It adds that such a large and immediate increase is unlikely to be offset by short-term cost and revenue improvements, forcing it to downgrade its full-year pre-tax profit guidance.

EasyJet CEO Andy Harrison says: “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.

“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.”

The airline says its revenues have continued to perform well, and adds that its Easter trading is on track, leaving its interim forecast unchanged. EasyJet is due to report its interim results on 7 May.

It says: “Currently, around 27% of EasyJet’s summer seats are sold which is slightly ahead of last year and the positive outlook for total revenue per seat in the second half of the year remains unchanged.”