LONDON, Jan 20, 2011 – British budget airline easyJet on Thursday warned that first-half losses could double on the back of soaring fuel costs, sending its shares diving, but the group insisted it was on course for a profitable year.
"The economic outlook in Europe remains uncertain and the higher market price of fuel will inevitably put pressure on margins in the short term," easyJet said in a trading update.
"The usual first-half loss is anticipated to be between £140 million and £160 million (166-190 million euros, $224-256 million)."
The predicted loss, for the six months to the end of March 2011, compared with a shortfall of £78.7 million in the same part of the previous fiscal year.
The no-frills airline, like many of its competitors, generally posts losses over this period because it covers the seasonally slower months of the year.
However, the profits warning sent easyJet shares plunging by 13.30 percent to 395.20 pence on the London stock market.
For its first quarter to December 2010, easyJet said that revenues rose 7.5 percent to £654 million despite widespread air transport chaos that was sparked by freezing weather conditions in Britain and elsewhere.
"Early indications are that second-half unit revenues remain robust and therefore, excluding the additional cost of fuel … and assuming no further significant disruption, our full-year expectations remain broadly unchanged."
Passenger numbers rose 8.8 percent to 11.9 million people in the first quarter.
"We are on track to be profitable again this year," a company spokesman told AFP on Thursday.
"Our revenues are heading in the right direction, we are going to add more flights this summer on our profitable leisure routes, we are seeing good cost reduction across the business and as a result we remain confident that we will have another year of profitable growth."
The airline admitted that the harsh cold snap in December had cost it about £18 million.
"Against a difficult economic backdrop … easyJet was able to deliver a solid trading performance and grow total revenue whilst improving its position in mainland Europe," chief executive Carolyn McCall said.
For its 2009/2010 financial year, easyJet posted a 70-percent jump in net profits to £121.3 million, highlighting the aviation sector\’s recovery after the global financial crisis — particularly for low-cost carriers.
The budget group has also unveiled plans to increase its fleet by 24 aircraft to 220 by 2013.
Independent analyst John Strickland said most airlines suffered over the winter period.
"Winter traffic volumes are typically lower for easyJet and other carriers in the European market while fixed cost levels are not proportionally lower," he told AFP.
"On top of this, the probability of weather disruption, as seen this winter, is higher, leading to further revenue losses and increased costs."
Strickland added: "easyJet is well placed in a weak market to gain traffic but fuel price increases and fragile consumer demand remain worries."