EasyJet flags uncertain outlook as Iran war lifts fuel costs, bookings weaken

* Middle East conflict drives up fuel costs, impacting easyJet's outlook

* EasyJet's ​fuel hedge ⁠offers partial protection, but exposure remains—Duncan Ferris, Freetrade

* Bookings ​shift to closer-to-home routes, with late bookings showing some year-on-year strength (Updates with share moves, comments from CEO on jet fuel hedging)

May 21 (Reuters) - British budget airline easyJet reported a first-half loss of 552 million pounds ($741.39 million) on Thursday, but ⁠said its full-year outlook remains uncertain as the Iran war drives ⁠up fuel costs and bookings weaken for ​the peak summer season.

The warning comes as the Iran conflict continues to disrupt global aviation, sending jet fuel prices up more than 80% since late February and forcing airlines to raise fares, cut capacity or absorb margin pressure ​as flows ‌through the Strait of Hormuz are constrained.

European airlines have downgraded profit expectations in recent weeks as the prospect of a prolonged conflict pushes fuel costs higher, particularly as hedges expire. Easyjet's first-half loss of 552 million pounds was broadly in line with the 540 million pound to 560 million pound loss it had warned of in ​April. "Our strategy is clear - through disciplined growth, accelerated upgrading, and continued expansion of easyJet holidays, we aim to bounce ‌back from this year’s Middle East-related setbacks," Chief Executive Kenton Jarvis said in a statement.

Shares were up 1.7% at 0822 GMT as analysts and investors pointed ‌to stability and few surprises in easyJet's results.

FUEL COST SURGE TESTS OUTLOOK

Analysts flagged fuel costs as a major risk.

"This is where things look dicey. The company’s 72% hedge at $726 offers it some protection, but ​not immunity. With the spot price sitting at $1,350 and each $100 movement equating to around £35m in fuel costs, EasyJet is looking a little ‌exposed," Duncan Ferris, investment writer at Freetrade, said in a note.

Jarvis told reporters on a media call that easyJet was renewing hedges farther out, as the prices then were lower than the current spot price. He also ⁠reiterated that ⁠hedging into summer and winter would shield the carrier from volatility.

Second-half bookings were ‌58% sold, reflecting a shift in consumer behaviour as travellers book closer to departure and opt for destinations nearer to home.

The airline ​said in-month bookings remained strong ​on a year-on-year basis, pointing to a continued move toward later booking patterns.

The ‌carrier has already begun reallocating capacity toward domestic and city routes to respond to weaker demand for longer-haul eastern Mediterranean destinations. It also plans to launch a loyalty programme in 2027 aimed at strengthening customer retention.

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