London (AFP) – British airline EasyJet, the target of a multi-billion-pound takeover battle, said Thursday that profits plunged in the third quarter as the Middle East war sent jet fuel prices soaring. Profit before tax slumped 70 percent to £85 million ($114 million) in the three months to the end of June, compared to a year earlier, the no-frills carrier said in a statement.
EasyJet is at the centre of a bidding war between two US private equity firms vying for ownership of the carrier that flies mainly across Europe. It has backed a £5.7-billion takeover bid from Apollo, after the US firm’s surprise offer of £7.15 per share beat Castlelake’s bid of £6.90 per share. EasyJet’s third quarter was impacted by “elevated fuel prices and a reduction in consumer demand following the onset of the Middle East conflict,” it said in an earnings statement. Fuel costs increased by £105 million compared with last year.
“We have continued to manage the impact of the Middle East conflict,” chief executive Kenton Jarvis said in a statement. The carrier added that its full-year performance depended on remaining bookings and fuel prices.
– Share price volatility –
Following the update, EasyJet’s share price jumped more than five percent to £6.16 on London’s second-tier FTSE 250 index, which left it still below the takeover offers. Its stock value had meanwhile plunged by as much as 15 percent Wednesday. The sizeable loss had been sparked by “concerns that Apollo’s…takeover offer could be threatened or delayed after the European Union said it is reviewing ownership rules to stop foreign investors taking control of airlines in the bloc,” said Victoria Scholar, head of investment at Interactive Investor.
“Shares are still trading sharply higher this year, reflecting the takeover premium, suggesting investors still believe a deal will ultimately go through,” she added. As foreign entities, Apollo and Castlelake have to propose an ownership structure that meets UK and European rules requiring firms to be majority owned and controlled by regional nationals. Jarvis said on an earning call that the EU’s review of its ownership rules is “an ongoing process” and could last two to three years. “Its timelines far exceed the bid process from Apollo, and it’s not linked at all. It’s just business as usual from the EU,” he added.
Apollo has until August 7 to make a firm offer or walk away under UK regulations, while Castlelake has until August 3. EasyJet’s losses had deepened by 27 percent in the first half of its financial year, to £377 million, as the US-Iran conflict sent fuel prices soaring and upended travel plans.
© 2024 AFP
