easyJet losses widen on soaring fuel costs

10th May 2011, Comments 0 comments

EasyJet's net losses widened to £114 million (131 million euros, $187 million) in the first-half on soaring jet fuel costs and higher taxes, the British no-frills airline said on Tuesday.

Losses after tax for the six months to March 31 compared with a net loss of £59 million during the group's first half in 2009/10, easyJet said in a results statement.

"The past six months has been tough with sharply rising fuel costs combined with cautious behaviour by consumers and an adverse impact from taxes on passengers," chief executive Carolyn McCall said in the earnings release.

Fuel costs rocketed a quarter to £383 million as easyJet -- in line with the global aviation sector -- felt the heat from surging oil prices. Jet fuel, or kerosene, is refined from crude oil.

But sales rose eight percent to £1.27 billion and total passenger numbers soared 11.6 percent to 23.9 million people, despite air transport chaos sparked by freezing weather conditions late last year and industrial action in Europe.

"Despite this difficult environment we have made strong progress over the past six months in implementing the strategy outlined following our review of the business last year," added McCall.

"Our top team has been rebuilt and we continue to optimise the network by configuring flight frequencies and destinations which are attractive to business travellers."

McCall, who was boss of publisher Guardian Media Group until last year, said easyJet had "delivered progress in controlling costs".

EasyJet also suffered from the impact of rising air taxation in Britain and elsewhere, as governments seek to raise revenues and curb large state deficits.

The low-cost company, based at Luton airport north of London, added that pre-tax losses also widened to £153 million in the first half, compared with £79 million last time around.

Many airlines suffer losses over the winter period, which covers the seasonally slower months of the year.

EasyJet had already forecast in January that it would suffer a pre-tax loss between £140-160 million in the first six months of its fiscal year, which runs until the end of September.

Davy Stockbrokers analyst Stephen Furlong said easyJet remained "vulnerable" to even higher oil prices and the uncertain outlook for British consumer sentiment.

"We retain our 'neutral' rating on easyJet. Recognising that it is trading below replacement value, we view the airline as particularly vulnerable to the twin threat of rising oil prices and UK consumer trends," he said on Tuesday.

The group's share price sank six percent to 367.6 pence in London trading ahead of Tuesday's close.

"This is a steadying, if not spectacular set of interims numbers, which should give the market comfort that progress is being made," noted analysts at Dolmen Stockbrokers.

© 2011 AFP

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