EasyJet's Q3 profit crashes 70% amid soaring fuel costs and takeover uncertainty
UK carrier's latest quarterly earnings took a hit from elevated fuel costs and reduced demand. EasyJet's fiscal third-quarter operating profit fell by more than two-thirds after the Iran war led to a £105 million ($140 million) increase in its fuel costs and weaker customer demand. The UK low-cost carrier, which is awaiting confirmation of a proposed £5.7 billion takeover by US investment firm Apollo Management, says the quarter ended 30 June was marred by a reduction in demand as concern over jet fuel supplies hit consumer confidence. However, it points to a "strong" late booking trend and says its seats are 68% sold for the fourth quarter. EasyJet has reported a £104 million operating profit for the period – down from a £293 million profit in the third quarter last year – and a profit before tax of £85 million, representing a 70% year-on-year drop. Its holidays division posted an £84 million pre-tax profit, which is £2 million lower than the same period last year. Group revenue was up 2% while passenger revenue dipped 1%. Capacity during the quarter was 3% higher than the corresponding period last year, but reduced passenger numbers resulted in a 1.3 percentage point fall in load factor to 88.9%. EasyJet expects full-year ASK capacity growth of 6% for fiscal 2026, and says capacity growth will "normalise" in the first half of fiscal 2027. "We have continued to manage the impact of the Middle East conflict, and its effect on fuel prices and booking trends, during the quarter," says EasyJet chief executive Kenton Jarvis. "As consumer confidence increases, we are seeing the load factor gap close for peak summer and an extension of the booking curve." Fuel costs on the unhedged portion of the carrier's fuel were a "headwind" in the third quarter, increasing its bill by £105 million year-on-year. EasyJet is 79% hedged at $786 per metric tonne going into the fourth quarter, but its fuel costs remain "uncertain due to price volatility". It is 62% hedged at $754/MT in the first half of fiscal 2027. Every $100/MT movement in price equates to about £17 million in extra fuel costs, says the carrier. As Airbus A319 retirements "accelerate", the carrier says upgauging will deliver about £250 million of incremental annual cost efficiencies across fiscal 2028 and 2029. Management changes The airline also discloses in its 23 July trading update that chief operating officer David Morgan is retiring from his role, "to return to flying as an EasyJet pilot". He will be succeeded by current chief commercial officer Sophie Dekkers. EasyJet has appointed former Norwegian chief commercial officer Daniel Skjeldam as Dekkers' replacement, effective 1 September. The carrier makes no mention of Apollo's proposed bid in its trading update. The US investment firm has until 7 August to make a firm bid for the airline or walk away. EasyJet has said it is "minded" to recommend Apollo's proposal to shareholders, should it turn into a firm offer. Apollo's proposal trumped an earlier proposed bid by Castlelake, which has, so far, not put forward a higher offer.