EasyJet admitted yesterday that fare increases were inevitable this winter as its chief executive gave warning that the high price of oil would reduce choice for travellers.

Andy Harrison said that fuel costs would cause some of the most exposed airlines to go out of business.

“EasyJet doesn’t set air fares, we accept the market price,” he said. “We expect a significant reduction in supply [of seats] so there will be an increase in market prices next year.

“If oil prices remain high a lot of airlines will cut back capacity or go out of business, leading to higher fares.”

Mr Harrison said that it was difficult to say by how much fares would increase, as the impact of higher jet fuel prices was different for every airline. At easyJet, the increase in fuel is costing about £7 a seat on every flight, a figure that it has partly offset through the introduction of charges on bags checked into the hold.

The airline is pinning its hopes on holiday-makers switching from long-haul trips to short-haul journeys, as the cost of flying increases dramatically. “It is going to be a lot more expensive to fly to Miami for winter sun than Italy,” Mr Harrison said.

The airline, which has been growing at about 10 per cent a year, said yesterday that it would reduce capacity by 4 to 6 per cent, cutting flights at quiet times to locations across Europe.

However, at Stansted, where airport charges have more than doubled in two years, the company will cut 12 per cent of its capacity, moving some Spanish-bound flights to Gatwick.

EasyJet is set to take delivery of 25 new aircraft next summer. However, a spokesman did not rule out extending the capacity freeze beyond the winter. He also said that the airline could get rid of 45 older and leased planes from its existing 165-strong fleet.

The spokesman said: “Some flights in November and January are unprofitable even with oil at low prices. When oil is this high it is prudent to cut capacity. We have a huge amount of flexibility to cut it or to bring it back and we can do so in the blink of an eye.”

Analysts believe the airline industry is entering a critical period in the next nine months as it copes with record oil prices and a seasonal downturn. There are also concerns that consumers will cut back on air travel as growth in Europe’s major economies slows.

Ryanair last week halted its expansion plans when it announced that it would withdraw 12 aircraft from Stansted this winter and the closure of seven European bases.

It is cutting services on its busiest routes at Stansted and will withdraw aircraft from seven other airports, including Budapest and Valencia, for six weeks from November 4. Ryanair is effectively reducing its fleet by 10 per cent this winter, including a decision to park a further four aircraft at Dublin airport.

EasyJet, which reports its full-year results in September, has said that pretax profits will fall to between £110 million and £120 million for the year to the end of September, compared with £191 million last year. The airline said that its costs had increased by about £185 million, driven by higher fuel prices.

Some 11.5 million passengers flew on easyJet in April, May and June, a 16 per cent increase on the same period last year. The majority of the growth was focused around London Gatwick, France, Italy and Spain.

Hitting headwinds

£110m The level to which easyJet’s pretax profits may fall this year
£185m The increase in costs, driven mainly by rising fuel prices
6% The amount by which easyJet may reduce capacity
45 The number of aircraft that it may get rid of

Source: easyJet

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