EasyJet is £57m in the red as fuel bills soar

Britain's biggest airline by passenger numbers reported a loss of £57 million for the six months to the end of March - against a £17 million deficit in the same period a year ago - as its fuel bill jumped by more than 40% and it racked up costs integrating the £100 million acquisition of Gatwick-based GB Airways.

Shares in easyJet have been plummeting in recent weeks, losing 55% of their value since November, on fears the carrier would follow up March's profit warning with another one. EasyJet said in March that rising fuel costs would wipe out its targeted 20% growth in profits this year on the basis of oil trading at $100 a barrel.

With crude now trading at over $120 a barrel - yesterday it hit a record $122 - easyJet chief executive Andy Harrison said that easyJet costs will rise by £2.5 million for every $1 per barrel over $100 that oil is this summer.

If crude stays at $120 a barrel until September, £50 million could be wiped off easyJet profits - a fall in earnings of 25% from 2007.

"We are not putting out a profit warning today," said Harrison. "What we are saying is the fuel price has gone up very fast - up 35% in the last three months and up 80% year on year - but that it is very unpredictable. What we are giving investors and analysts is the basic economics so they can form their own view.

"But the rising cost of fuel impacts all airlines, and what is certain that at these levels the laws of the jungle kick in. The weak will get weaker and weaker airlines will downsize, will merge or will disappear altogether.

"That is particularly true of airlines running older fleets. A quarter of aircraft flying short-haul around Europe are 15 years old or older and, compared to our new fuel-efficient fleet, burn 20% more fuel. These are the sort of operations that were not economic at $70 a barrel oil let alone $120 barrel."

Harrison said despite the half-year losses - easyJet traditionally makes most or all of its money in the spring and summer seasons - the airline is bigger and stronger than it was last year.

The carrier reported passenger numbers up 15% to almost 19 million in the six months, with increased fares and - controversially - baggage charges sending revenues up 24% to £892 million. The airline's sales per seat were up 1.5% but costs per seat stayed flat, said Harrison.

"Our outlook, ignoring the oil price, is good," he added. "Summer bookings are ahead of where we were last year and, despite what is being said about the UK economy, load factors in London [how full easyJet's planes are out of Gatwick, Stansted and Luton] have shown particular strength.

"Nearly half of all our passengers are now non-UK, and we have seen that strength across the board with absolutely no end in sight of discretionary spending on travel."