EasyJet profits plummet as fuel costs clip wings

Published on Saturday 14 November 2009 12:09

NO-FRILLS airline easyJet is expected to reveal the scars of the recession in its full-year results this week but will attempt to play down the competitive threat from the merger of British Airways and Spain's Iberia.

Surging fuel costs in the first half are likely to more than halve easyJet's annual profits as it covered four full quarters of recession.

The City consensus is for an underlying pre-tax profit of 43 million to 44m before aircraft disposals, down from 100m in the previous year. The profit consensus for the trading year to end-September 2010 is 158m.

Andy Harrison, easyJet's chief executive, said at the interim results that like-for-like fuel costs jumped 90m, but as the oil price has fallen back he is expected to say fuel costs were broadly stable in the second half.

Despite the headwinds, it is thought Harrison will say he believes the company can weather stronger competition from a merged BA/Iberia, the mega deal that was agreed last Thursday.

That tie-up, triggered by the intense pressures major airlines are under in the recession as passenger numbers fall, is expected to yield ?400m of synergies to make the merged a company a leaner, fitter competitor.

But one analyst said: "EasyJet has been able to take market share off both British Airways and Iberia over the past decade and more because it has a materially lower costbase.

"Even allowing for the synergies of the merger, the combined BA/Iberia will still have an inflated costbase compared to easyJet. It is not a helpful development for the other airlines, but I don't think the best budget players, in particular, will be quaking on the runway."

EasyJet will also confirm it has received far less interest income on its cash pile.