Key facts
- EasyJet reported a 70% drop in pre-tax profit to £85m for April-June.
- Soaring fuel costs, exacerbated by the Iran conflict, led to a £105m increase in expenses.
- The airline's profit was hit by £200m due to the Iran war.
- Two US investment firms, Castlelake and Apollo Global Management, are in a bidding war for the airline.
- A potential EU review of airline ownership rules could impact the takeover bids.
EasyJet has reported a 70% plunge in pre-tax profits to £85m for the period between April and June, a significant drop from £286m in the same period last year. The airline attributed the decline to soaring fuel costs, which increased by £105m, and a trend of later bookings, both influenced by the conflict in the Middle East. The company stated that the Iran war has sent energy prices rocketing, impacting its operational costs.
Amidst this financial pressure, EasyJet is the subject of a takeover battle between two US investment firms. The airline's board initially accepted a £5.5bn bid from Castlelake, but later recommended a higher offer of £5.7bn from Apollo Global Management. However, a potential review by the European Union regarding airline ownership rules has introduced uncertainty, as EU regulations require 51% local ownership, a requirement Apollo has yet to detail how it will meet.
Despite the profit slide, EasyJet noted an improvement in customer bookings, with passengers continuing to book trips closer to departure dates. Chief Executive Kenton Jarvis highlighted attractive pricing driving strong late booking demand. Rival Ryanair also reported a 34% drop in profits to €538m due to doubled jet fuel prices.
EasyJet shares rose over 5% on Thursday, partially recovering from a previous day's 10% fall triggered by reports of an impending EU review into airline ownership rules aimed at protecting European strategic autonomy. Analysts have warned that the bidding war could distract from the business's growth prospects, with some suggesting it highlights the market's undervaluation of EasyJet.