EasyJet profit plunges 70% as Middle East conflict drives up fuel costs

EasyJet PLC reported a 70% drop in Q3 profit to £85 million as the Middle East conflict pushed fuel costs £105 million higher and weakened booking demand.

"The operating environment remains challenging due to the geopolitical situation and its impact on fuel prices," EasyJet said in its earnings statement Thursday.

Revenue rose 2% to £2.98 billion, supported by growth in holidays and ancillary services. Capacity measured by available seat kilometres increased 3%, while load factor slipped 1 percentage point to 88.9%. Revenue per ASK declined 3% year-on-year. Headline cost per ASK excluding fuel rose 3%, in line with guidance, while fuel cost per ASK jumped 13%.

The results show the financial toll from five months of conflict in the Middle East, which has disrupted flight paths and inflated jet fuel costs. EasyJet said it was 68% sold for the fourth quarter, with booked ticket yield flat and load factor 2 percentage points below last year, though it noted signs of improvement from the gap reported in May.

The airline carried 25.8 million passengers during the quarter. It expects full-year ASK capacity to grow about 6% and seats to rise around 3%. EasyJet holidays customers are forecast to increase by low double digits from a base of 3.1 million.

EasyJet has backed a £5.7 billion takeover offer from US investment firm Apollo, which was preferred over rival approaches from Castlelake. The airline reiterated its medium-term target of more than 1 billion pounds in pre-tax profit as market conditions normalize.

The profit collapse points to severe margin compression for Europe's low-cost carriers as fuel costs outpace revenue growth. Investors will watch EasyJet's Q4 trading update for evidence that late-summer bookings can offset the cost headwind and whether Apollo's bid proceeds.

This article is for informational purposes only and does not constitute investment advice.