The high cost of oil threatens to increase easyJet’s fuel bill by 27% this year and by a further one third in 2012.
London investment bank Liberum Capital issued the fuel-price forecast yesterday, warning that the crisis in Libya and unrest in the Middle East would keep oil prices high beyond the next few days and weeks.
Liberum Capital head of research Peter Hyde told business news agency Bloomberg: “A solution to the Middle East crisis is looking increasingly unlikely in the short term.” Prices would remain at current levels for “at least a few months”, Hyde warned.
The investment bank forecast easyJet’s fuel bill would hit £934 million in the current financial year and £1.25 billion in the next. Airline association IATA reported last week that the price of jet fuel has risen almost 50% on a year ago.
Jet fuel trades at a higher price than crude oil. Carriers rarely pay the headline price of fuel since they hedge a proportion of their needs a year or more in advance. However, this merely ensures a degree of price stability. The cost of hedging rises in line with the price of oil.