EasyJet (LSE:EZJ) shares dropped more than 3% on Thursday after the airline warned of a larger-than-expected first-half loss, citing geopolitical tensions in the Middle East and volatile fuel costs as key headwinds heading into the peak summer season.
In a trading update ahead of its half-year results, the company said it expects a headline loss before tax of between £540 million and £560 million for the six months to 31 March. This guidance is around 7% below analyst expectations at the midpoint, reflecting a £25 million increase in fuel costs during March and an additional £30 million in legal provisions.
Chief executive Kenton Jarvis said demand remained “positive” following a strong Easter period but acknowledged that overall performance has weakened compared with last year, “impacted by the conflict in the Middle East and the competitive environment in some markets.”
The airline noted that rising regional instability has led to a shorter booking window and “lower than normal forward visibility,” making demand trends harder to predict. While easyJet has hedged around 70% of its summer fuel requirements at $706 per metric tonne, the remaining exposure leaves it vulnerable to spot prices currently near $1,500.
The company added that every $100 movement in fuel prices now translates into an estimated £40 million impact on second-half costs.
Despite the negative share reaction, easyJet highlighted solid operational metrics, including a 90% load factor, up two percentage points year on year, and a 22% increase in customers within its holidays division. However, analysts at Morgan Stanley noted that pricing recovery is being limited by shorter booking cycles, with third-quarter revenue per available seat kilometre currently trending slightly lower and 63% of seats sold.
“easyJet’s financial strength from our investment grade balance sheet and £4.7 billion of liquidity mean we are well placed to navigate current geopolitical challenges while remaining focused on our medium term target,” Jarvis added.
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