UK budget airline EasyJet warned of a bigger first-half loss and said bookings were lagging compared to last year as a result of uncertainty sparked by the Iran war, denting its shares and those of other budget airlines today.
With European airlines set to start reporting first-quarter results in the coming weeks, the market will be eyeing any indication of the extent of the conflict's impact on their already fragile profit margins and revenue.
EasyJet's budget rival Wizz Air has already said its annual net profit will take a €50m hit.
"The conflict in the Middle East has introduced near-term uncertainty around fuel costs and customer demand. As expected, the booking curve has shortened in recent weeks, resulting in lower than normal forward visibility," EasyJet said today.
Shares in EasyJet fell by as much as 9%, while competitors Ryanair fell over 4% in Dublin trade and Wizz Air also slipped.
The conflict has sent jet fuel prices soaring, upending the global aviation industry and forcing airlines to raise fares, curb growth plans and rethink forecasts.
EasyJet chief executive Kenton Jarvis told reporters on a media call that travellers are booking closer to their travel dates, and there had been an initial shift to more domestic, city destination travel.
"It's a later booking window we're really seeing. And if there is any shift, it's a little bit away from the eastern Mediterranean, a little bit towards the Western Mediterranean," he said.
Travel to Cyprus, Egypt and Turkey, however, was slowly recovering, Jarvis added.
EasyJet forecast a headline pre-tax loss of £540-560m for the first half, including £25m in extra fuel costs in March and £30m in expenses from higher legal provisions.
It reported a loss of £394m a year earlier.
The airline's summer bookings were below year-ago levels, it said, with third-quarter bookings 63% sold compared with 65% last year.
Bookings for the July-to-September fourth quarter, meanwhile, were 30% sold, and Jarvis said expectations for load factors - the portion of available seats filled by paying customers - during the period remained uncertain.
"That will very much depend on what the late-summer market is like, and obviously what happens to the conflict in the next week or two," he said.
EasyJet had already warned that the Iran war would push up ticket prices towards the end of the summer, and that the conflict had impacted bookings.
EasyJet said it was well hedged against fuel volatility, with 70% of summer fuel locked in at $706 per metric ton. The hedges will start unwinding towards the end of the summer, however, potentially pushing higher costs through to fares.
"Pricing is protected in the short term. But clearly, if fuel remains high for longer, then that will feed in for the whole industry in terms of prices," Jarvis told reporters.
The airline added that its £4.7 billion of liquidity would help it navigate the challenging operating environment and continue working towards its medium-term targets.
