The budget airline easyJet has issued a stark warning that the ongoing conflict involving Iran is significantly impacting its financial performance, driving up fuel costs and affecting customer booking patterns. The carrier revealed that fuel expenses have surged by £25 million in just the past month alone due to the geopolitical tensions.
Financial Forecast and Increased Losses
EasyJet now anticipates reporting a pre-tax loss ranging between £540 million and £560 million for the six months ending in March. This represents a notable increase from the £394 million loss recorded in the first half of the 2024-25 financial year. The airline typically relies on the second half of the year, which includes the peak summer travel season, to generate the majority of its profits.
Fuel Hedging Strategy and Market Volatility
While easyJet has secured hedging for 70% of its fuel requirements for the remainder of the financial year through to September, the company remains exposed to market fluctuations for the unhedged portion. The airline highlighted that every $100 movement in the spot price of jet fuel per metric tonne adds approximately £40 million to its costs for this unhedged supply. Currently, fuel prices are about $800 higher per tonne than before the conflict began, exacerbating financial pressures.
Booking Trends and Customer Behavior
Kenton Jarvis, the chief executive of easyJet, noted that while short-term demand remains robust, customers are increasingly delaying their bookings due to economic uncertainty. This trend has led to a general shortening of the booking window, with passengers waiting until closer to their departure dates to make reservations. Jarvis described this as a "general shortening of the booking window as people wait till close to the point of departure to book."
Despite these challenges, Jarvis expressed confidence in the airline's operational stability. He emphasized that fuel supplies are proceeding as normal and dismissed speculation about potential flight cancellations later in the summer, a concern previously raised by Ryanair's Michael O'Leary regarding the Strait of Hormuz. Jarvis stated, "We have visibility to the middle of May and we have no concerns."
Market Shifts and Regional Demand
Jarvis also provided insights into shifting travel patterns, noting an initial decline in bookings for destinations such as Egypt, Turkey, and Cyprus following drone incidents in Akrotiri. However, he reported that demand for these areas has begun to recover slightly. He observed, "If there is any shift, it's a little bit away from the eastern Med and a little bit towards the western Med."
In early trading, easyJet's shares fell by 3%, reflecting investor concerns over the airline's financial outlook amid the ongoing geopolitical and economic challenges.
