Ryanair price war threat drives easyJet to new low

Easyjet shares plunged to an all-time low yesterday as concern mounted among investors that its profits will be savaged by the fresh price war sparked off by its low-fares rival Ryanair.

The Irish carrier said on Tuesday that it planned to grab more market share this year by cutting average fares by about 10 per cent at the expense of its own profit margins. Ryanair kicked off the campaign by offering one million seats or a third of its summer capacity at prices ranging from £19.99 to £29.99.

EasyJet shares responded by falling a further 4 per cent yesterday to close at 167.25p - the lowest they have been since the airline's stock market flotation two and a half years ago.

The low-cost carrier's woes were further compounded after the Advertising Standards Authority upheld a complaint about misleading fare promotions.

EasyJet, run by Ray Webster, has been under pressure since announcing the takeover of Go a year ago and then unveiling a huge order for Airbus aircraft, making it the first low-cost carrier in the world to experiment with a mixed fleet.

The airline has also been affected along with other carriers by worries over the economic downturn and volatile fuel prices. Last month easyJet reported a first half loss of £47m, part of which was blamed on the cost of integrating Go.

EasyJet recently began hedging its jet fuel costs and dollar exposure to make it less vulnerable to swings in foreign currency and oil markets. Previously, it paid spot prices for fuel.

The airline also hit back at the ASA ruling, pointing out that thousands of passengers had taken advantage of the fares promotion and only two complaints were received - one from the Consumers' Association and the other from an individual.

The complaint concerned an easyJet sale of seats for £1 and the airline's failure to make clear in prominent type that the price excluded taxes and airport charges. EasyJet said the adverts had made it perfectly clear that taxes and charges were extra and advised the ASA to concentrate instead on "serial offenders" elsewhere in the airline industry.