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Increased fuel costs to bring down EasyJet margins

UK budget carrier EasyJet is expecting fuel prices to depress its interim pre-tax margins but it is maintaining its forecast for 20% full-year pre-tax profit growth.

In an interim management statement for the quarter ended 31 December, EasyJet says it expects first-half pre-tax margins – excluding the impact of its acquisition of GB Airways – will decline by two to three percentage points, largely due to increased fuel costs.

For the full year, it adds, profit guidance remains unchanged with underlying profit before tax expected to grow by around 20%.

EasyJet is integrating former BA franchise carrier GB Airways into its operation, after completing the acquisition on 31 January. It expects the impact of this in the first half to be a pre-tax loss of around £7 million ($10.2 million).

“This is slightly above normal levels due to the increase in marketing investment to ensure a strong summer performance,” says the carrier.

“On a full-year basis the acquisition of GB Airways will be earnings-enhancing before integration costs of around £12 million, which will largely be incurred in the first half of the financial year.”

EasyJet’s revenue for the quarter was 14% up at £418 million, with ancillary revenue making up 13.6% of the total. EasyJet introduced checked-baggage charges in October, swelling its ancillary revenue by 62%.

Revenue for the second quarter, it says, is expected to continue to perform ahead of original expectations due to the increase in the checked-bag charge and the strength of the euro. But although EasyJet expects to exceed its previous revenue outlook, it says this will be offset by increased airport, navigation and European-based crew costs.

Source:'s premium news site Air Transport Intelligence news

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