EasyJet profits plunge 70% as fuel costs soar amid Iran war

The low-cost airline easyJet has revealed a 70% slide in profits because of soaring fuel costs and later bookings as a result of the conflict in Iran, only weeks after it agreed to a £5.7bn takeover.The carrier reported a pre-tax profit of £85m between April and June compared with £286m during the same period a year earlier, as its fuel costs increased by £105m after the outbreak of hostilities in the Middle East in late February sent energy prices rocketing.It came as two US investment firms vie to buy easyJet. The airline’s board originally accepted the fifth bid from Castlelake, worth £5.5bn, but then recommended a higher bid from Apollo Global Management, worth £5.7bn, or more than £7 a share. However, a potential EU review of airline ownership has cast a question mark over the deal.easyJet said customer bookings had begun to improve, but passengers were continuing the trend of booking their trips just before departure.The company said the outlook for the remainder of its financial year was dependent on “important remaining bookings, as well as fuel prices, which continue to be volatile”.easyJet’s budget carrier rival Ryanair revealed on Monday a 34% drop in profits to €538m (£457m) in the three months to the end of June, owing to the price of jet fuel doubling amid the Iran-war" class="entity-link entity-event" data-entity-id="38748" data-entity-type="event">Iran war. The price increase affected the cost of the 20% of fuel the airline needed for its fleet that was not hedged against price fluctuations.As uncertainty over easyJet’s future ownership continues, the airline said consumer confidence was increasing during its peak summer holiday season.Kenton Jarvis, easyJet’s chief executive, said: “Pricing has been attractive, driving strong late booking demand for our flights and holidays.”However, the airline conceded that passengers were looking for good deals to convince them to book their trips in advance and before the month of departure.Despite news of the profit slide, easyJet shares rose more than 5% in early trading on Thursday, partly recouping the previous day’s 10% fall that followed reports that the EU was preparing to tighten up airline ownership rules, potentially putting its planned takeover bids in doubt.skip past newsletter promotionafter newsletter promotionAn unnamed EU official told Reuters on Wednesday that a review of airline ownership would “protect strategic autonomy” and ensure control of regional airlines remains within Europe.EU rules demand 51% local ownership, and while Castlelake had named EU citizens as co-investors, Apollo has not explained how it plans to meet the requirements.Analysts have warned that the takeover battle for easyJet between US private equity groups “risks becoming a distraction”.Garry White, the chief investment commentator at the wealth management firm Raymond James, said: “The very existence of a bidding war highlights what easyJet’s board has long argued: that the market has been undervaluing the business and its growth prospects for quite some time.”