Easyjet's bottom line continues to be hit by the war in the Middle East as quarterly profits tumbled on higher fuel prices and weaker consumer confidence. 

The airline posted an £85million profit for the three months to 30 June, down 70 per cent from £286million at the same point a year ago, following a reduction in customer demand. 

In a turbulent week for the business, takeover target Easyjet's shares plunged nearly 12 per cent yesterday after reports suggested the European Union is preparing to review ownership rules to prevent foreign investors gaining control. 

Easyjet this month backed a £5.7billion takeover offer from US private equity group Apollo, after an earlier £5.5billion offer from another US suitor, Castlelake. 

Its shares rallied 5 per cent this morning as the budget airline said it saw strong late-booking demand heading into the peak summer period. It has sold 68 per cent of its airline capacity for the current quarter.

Chief executive Kenton Jarvis said passengers were beginning to book further in advance. 

'As consumer confidence increases, we are seeing the load factor gap close for peak summer and an extension of the booking curve as customers continue to prioritise travel and take advantage of our great fares,' he said. 

However, later bookings in the third quarter failed to offset weaker booking trends following the outbreak of the war. 

Group revenue rose 2 per cent to £2.98billion, but fuel costs surged 17 per cent to £732million as prices for its unhedged requirements peaked at around $1,800 per metric tonne in April.

Revenue per available seat kilometre fell by 3 per cent, while passenger numbers were broadly flat at 25.8million despite a 1 per cent increase in seat capacity, with the group's load factor falling by 1.3 percentage points to 88.9 per cent.

The company's holidays arm proved more resilient, with profit before tax slipping 2 per cent to £84million as customer numbers grew by 8 per cent. 

Excluding currency movements, profit increased 7 per cent in the firm's holidays division. 

Easyjet said its annual outlook was dependent on late summer bookings and fuel prices. It said fuel prices 'continue to be volatile'.  

Jarvis said: 'We have continued to manage the impact of the Middle East conflict, and its effect on fuel prices and booking trends, during the quarter.' 

He added that pricing had been 'attractive, driving strong late booking demand for our flights and holidays'. 

Easyjet's rival Ryanair this week said it had been forced to cut ticket prices over the summer because of a slump in demand.  

This morning, Heathrow also said demand for travel across the Middle East had 'softened' as a result of the war, but demand was strong in North America and across Asia-Pacific. 

Heathrow reported a record 40 million passengers in the first half of the year.

Garry White, chief investment commentator at Raymond James, said: 'Management reiterated its focus on strategic initiatives to deliver its medium-term profit target of more than £1billion. 

'However, the ongoing takeover battle between US private equity groups Castlelake and Apollo Global Management risks becoming a distraction. That said, the very existence of a bidding war highlights what easyJet’s board has long argued: that the market has been undervaluing the business and its growth prospects for quite some time.'