EasyJet PLC shares fell 5.3% Thursday after Europe's second-largest budget airline issued a dual warning: fuel costs had surged by approximately £25 million in the first half of fiscal 2026 due to elevated jet fuel prices driven by the Middle East conflict, and forward bookings for its Mediterranean and Middle Eastern destination routes were running below the prior year's pace as travelers grew cautious about regional travel.
CEO Johan Lundgren told analysts that the airline had hedged approximately 60% of its H1 fuel requirements, limiting — but not eliminating — the damage from jet fuel's 22% price increase since the conflict began. The unhedged portion cost the company roughly £25 million more than planned, a meaningful headwind for a carrier that generates pre-tax profits of approximately £500-600 million in a strong year.
Booking Softness Concentrated in Specific Routes
EasyJet said bookings weakness is concentrated in routes to Egypt, Israel, Jordan, and Lebanon — destinations that collectively represent roughly 8% of its seat capacity — where load factors are running 12-15 percentage points below year-ago levels. Northern European and intra-European leisure routes, which account for the bulk of the network, remain healthy, with summer 2026 forward bookings 6% ahead of the equivalent 2025 period in seat volume.
The carrier said it had rapidly redeployed capacity from affected Middle Eastern routes to alternative destinations, including Morocco, the Canary Islands, and Portuguese resort towns, where demand is running exceptionally strong as European travelers substitute geopolitically safer alternatives.
European Aviation Faces Bifurcated Outlook
EasyJet's warning contrasts with stronger messages from carriers with lower Middle East exposure. Ryanair, whose network is less concentrated in the affected region, reiterated full-year profit guidance earlier this week. Lufthansa Group, with significant intercontinental exposure, faces different headwinds from elevated overfly costs as some routes can no longer transit Iranian airspace.
easyJet maintained its full-year guidance for revenue growth of 5-7%, but analysts note the guidance carries wider-than-usual uncertainty given the unpredictable trajectory of the conflict. The shares are now down 18% from their 52-week high reached in January, before the Middle East crisis erupted. Several hedge funds are believed to have established short positions, though the stock's valuation at 7x forward earnings is already pricing in significant earnings deterioration, according to analysts at Bernstein Research.