EasyJet Warns of Bigger First-Half Loss on Middle East Fuel Costs, Legal Bills

EasyJet warns Iran war to hit summer bookings, deepen first-half loss

Impact of Iran Conflict on EasyJet and the Airline Industry

By Shashwat Awasthi and Raechel Thankam Job

April 16 (Reuters) - Britain's easyJet warned of a bigger first-half loss and said bookings were lagging year-ago levels as a result of uncertainty sparked by the Iran war, denting its shares and those of other budget airlines on Thursday.

Short-term Uncertainty and Market Reaction

"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.

Shares in easyJet fell by as much as 9%, while rivals Ryanair and Wizz Air slipped as the update gave further insight into how the war, which began with U.S.-Israeli strikes on Iran on February 28, is hitting European airlines.

Rising Costs and Industry Challenges

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.

Financial Forecasts and Losses

EasyJet forecast a headline pre-tax loss of 540 million to 560 million pounds ($733 million to $761 million) for the first half, including 25 million pounds in extra fuel costs in March and 30 million pounds in expenses from higher legal provisions.

It reported a loss of 394 million pounds a year earlier.

Bookings and Hedging Strategies

Bookings Trail, Summer Fuel Hedged

The airline's summer bookings were below year-ago levels, it said, with third-quarter bookings 63% sold compared with 65% last year. Fourth-quarter bookings were 30% sold so far.

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, with customers moving away from booking trips to Turkey, Egypt and Cyprus.

Fuel Hedging and Future Outlook

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, potentially pushing higher costs through to fares.

The airline added that its 4.7 billion pounds of liquidity would help it navigate the challenging operating environment and continue working towards its medium-term targets.

Additional Information

($1 = 0.7364 pounds)

(Reporting by Shashwat Awasthi and Raechel Thankam Job in Bengaluru; Editing by Subhranshu Sahu, Joe Bavier and Alexander Smith)