Shares in British low-cost airline Easyjet plunged by 16.4% after the company said increases in fuel costs would erode its full-year profit. Rival airlines Easyjet and British Airways also registered a drop in their share price.
British budget airline easyJet said record fuel costs would erode its full-year profit if they didn't fall soon, hitting its shares and those of other airlines.
EasyJet shares fell 16.4 percent to 313 pence by 0901 GMT, as brokerage Panmure and investment bank UBS downgraded their ratings of the stock.
Budget rival Ryanair fell 10.1 percent, while British Airways was 4 percent lower, Air France-KLM was down 1.8 percent and Lufthansa was down 0.9 percent.
"First-half results will be in line with our expectations, however it is pretty obvious that if the recent significant rise in the fuel price is maintained then our second-half profits will be lower than we had previously expected," said easyJet Chief Executive Andy Harrison.
The airline said the forward price for jet fuel this summer was over $1,000 per tonne, and at that level its fuel costs would rise by 45 million pounds ($90.6 million) in the second half despite 40 percent of its fuel needs being hedged at $750 per tonne.
"It is unlikely that such a large and immediate fuel increase could be mitigated in the short term by revenue improvements and cost actions, therefore pretax profits for the full year would be below previous guidance," easyJet said.
UBS analyst Tim Marshall downgraded his forecast for this year by 25 percent, next year by 41 percent and the following year by 40 percent.
"Less financially strong airlines will suffer more," he said of the shares. "But in the short term, we suspect performance
will track oil."
EasyJet said that its relatively new fleet of aircraft, which consume less fuel than older fleets, and its low-cost business model would help it compete.
"Of course the price of fuel will hit all airlines and we remain convinced... that we shall emerge as winners in a high - oil price environment," it said.
Its February load factor -- a measure of how well it fills its planes -- was up 1.8 percentage points versus the prior year
to 84.8 percent and trading for Easter is on track.
Around 27 percent of easyJet's summer seats are sold which is slightly ahead of last year, it added.
Date created : 2008-03-19