easyJet hit by soaring fuel costs

Budget airline, easyJet, has reported that its first half pre-tax losses had trebled to £57 million, compared with £17.1 million a year ago.

Passenger numbers in the first half of the year increased by 15% to 18.9 million. Revenue grew 24% to £892.2 million.

The company claimed that its underlying business was strong and that it would survive the problems in the airline industry.

There have been concerns recently about the airline industry after Oasis Hong Kong Airlines announced it was to stop flying and applied for a voluntary liquidator.

US carriers including ATA Airlines, Aloha Airgroup and Skybus Airlines all ceased trading in March.

More recently, EOS and Maxjet revealed they would cease flying.

The airline industry appears to be diving into its most serious downturn since the post 9/11 crisis in 2001 and 2002.

Andy Harrison, the chief executive of easyJet, said the cost of fuel is going to grab the headlines today but aside from that we have achieved a good set of results.

We are not even seeing a small dint in the sales of tickets, whether for short breaks or for summer holidays, said Mr Harrison.

The airline has already taken 40% of its second half bookings which is marginally ahead of last year.

Mr Harrison added what is certain is that if these fuel increases are maintained many of our weaker competitors will disappear or downsize and easyJet will emerge even stronger reflecting the combination of our business model, our cost advantage, our new fuel efficient fleet and the strength of our network.

The Luton-based airline, which purchased British Airways franchisee GB Airways in October last year, said that fuel costs were £67 million higher in the 6 months to 31 March 2008, as the jet fuel price climbed 80%.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said these are clearly turbulent times for easyJet, with the rising cost of oil severely impacting on profits.

That said, underlying trading remains reassuring, with the volume of passengers travelling holding up and forward bookings marginally improving over this time last year, concluded Mr Bowman.

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