British low-cost airline easyJet warns the weaker pound and pricier fuel will reduce its profits more than expected this year.
ADVERTISEMENTBritish low-cost airline easyJet has warned the weaker value of the pound will hit its profits more than expected this year – by an additional 15 million pounds (17 million euros).
The news sent its shares lower by as much as nine percent on Tuesday.
UK-based airlines face a double whammy from the weaker pound since Britain voted to leave the European Union in June as well as rising fuel costs.
Easyjet plummets again after low pound buffets earnings https://t.co/N8TqjNVwUd
— LONTRAD (@lontradnews) January 24, 2017
EasyJet estimated that its fuel costs will increase by an additional 20 million pounds (23 million euros) in the 12 months through to the end of September 2017.
Fuel is prices in dollars but easyJet earns about half its revenues from sales in pounds.
Even though weaker sterling also makes travel to Europe more expensive for those flying from Britain easyJet said demand from UK leisure passengers remains strong.
“There’s no evidence at the moment that Britons are staying at home and having holidays only at home,” easyJet CEO Carolyn McCall told reporters.
A price war is raging in Europe’s short-haul travel market and rival Ryanair said on Tuesday that it expects average fares to continue to fall.
The headwinds
The pound has fallen 17 percent against the US dollar since the Brexit vote
Crude oil is around $53 a barrel from close to $30 this time last year
“No other major airline reports in sterling or earns a similar proportion of its revenue in sterling” – easyJet CEO Carolyn McCall
EasyJet shares plunge as weaker pound weigh on profit https://t.co/O8RIblA62Q
— This is Money (@thisismoney) January 24, 2017
