EasyJet shares tumble

Discount airline easyJet today saw shares tumble after revealing it had cut fares to encourage passengers on to its planes amid tougher economic conditions and increased competition.

The group, which bought rival Go last May, said for the four months to January 31 its average fare was around 6% lower than the fare generated by the two airlines during the same period in 2001.

EasyJet said the reason was partly competition but was more to do with difficult economic conditions.

A spokesman said: “It is not just competition, if you look at the economies of the world at this time, people don’t have as much money to spend. It is less to do with competition and more to do with economic reasons.”

The airline industry has been transformed over the past few years as firms such as Ryanair, easyJet and Bmibaby launched budget fares to lure customers from established carriers, increasing price competition in the market.

Ryanair last month stepped up the competition by launching a raft of new low fares.

Shares in easyJet today tumbled 14% to 208p as investors worried about the effect lower prices would have on yields.

One analyst said: “Airlines are feeling the impact of the economy but they are also hurting from competition.”