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Jet2 bookings for summer surge despite Middle East uncertainty

British travel company Jet2 announced on Wednesday that customers were now more likely to book holidays after delaying bookings due to the Middle East conflict. Summer passengers booked to date are up 7.1% and its shares have risen by 16%. Global aviation and leisure industries have been struggling with high costs and low consumer confidence due to the Iran War. Jet2 however, said that booking trends improved over recent weeks because of a reduction in geopolitical uncertainties.

Steve Heapy, the Chief Executive of the company, said that the demand for travel had increased following the "calming down" in the Gulf. Customers were delaying their plans to travel rather than cancelling them.

The recovery could be threatened by the comments made on Wednesday by U.S. president Donald Trump that the interim agreement signed in June to secure?peace with Iran is "over".

The shares of the airline and package tour company rose 9.2% to 1,581 pence at 0937 GMT. They had earlier reached their highest level since January.

Summer Trends Leeds-based Jet2 reported that on-sale capacities for the summer were running 7.7% ahead of the previous year. The average load factor in the first four month was 1.2 percentage points more, thanks to targeted price reductions for late bookers.

Heapy stated that bookings across Jet2’s network, which spans 25 countries, had recovered. However, the strongest growth was in the areas closest to conflict zones, such as Turkey, Cyprus and eastern Greek islands.

In order to protect itself from fuel price volatility, 90% of the UK's third largest airline hedged its full-year jet-fuel requirements at an average of $743 per ton. Jet2 announced in April that it had 87% of its summer jet fuel requirements hedged at an average price of $707 per metric ton.

Jet2 also pointed to its new London Gatwick operations performing ahead of ?its initial expectations, ?supported by a stronger-than-expected package holiday mix.

The HEATWAVE has not pushed up demand

The group added that Europe's heatwave has not yet impacted demand. Heapy said that the intense?humidity of the UK could even encourage bookings by customers looking for drier summers in other countries.

Jet2 has also launched a PS250m share buyback despite a 7% drop in pretax profits to PS551m ($735.25m) for the fiscal year ending March 31.

JPMorgan analysts wrote in a recent note that despite the recent improvement, it is still expected to be a challenging earnings situation in the near term, given the competitive UK outbound leisure market and the Middle East's impact, as well as the immaturity of the new bases in the UK, including Gatwick. ($1 = 0.7494 pounds)

(source: Reuters)