Shares in low-cost European airline easyJet plummeted Tuesday after it said that earnings for the second half of the year will be below its previous guidance if fuel prices continue at current levels.
"It is pretty obvious that if the recent significant rise in the fuel price is maintained, then our second half profits will be lower than we previously expected," Andy Harrison, CEO of easyJet said in a statement.
EasyJet previously forecast an increase of 20 percent in pretax profit for the 12-month period through September 30.
EasyJet said that summer seat sales were slightly ahead of last year's figures and its outlook for total revenue per seat in the second half remained unchanged.
But with oil at record levels above $100 per barrel, easyJet, like other airlines, will incur significant fuel cost increases. Crude prices are up 13 percent this year.
The company has hedged 40 percent of its fuel requirements at $750 per ton, but the current forward prices for jet fuel for summer 2008 is over $1,000 per ton. At current prices that would translate into $90 million in additional second-half fuel costs.
Still, with its new fuel-efficient fleet and the strength of the easyJet business model the company remains confident, Harrison said.
EasyJet shares fell almost 17 percent in early morning trade on London's FTSE-100 index.