Passengers return to easyJet despite inflation problems

The company announced a return to the traditional January booking boom, hitting record highs in a few days. As a result, the company expects to beat market expectations for earnings this year.

“In the first quarter, we saw strong and resilient demand for travel, with customer numbers up nearly 50% year-over-year,” CEO Johan Lundgren said in a shareholder report.

“Many returned to book during the traditional turn-of-the-year sale, when we filled five planes every minute during peak hours, resulting in three record sales weekends this month.”

HeraldScotland: Johan LundgrenJohan Lundgren (Image: Agency)

Fares have risen by nearly a quarter for the Easter holidays this year, and comparable prices are now up 24% from the same period in 2019, the year before the pandemic began. Demand for travel in the UK has been strong, with easyJet already selling 60% of its tickets this summer.

Given the prevailing economic difficulties, the numbers turned out to be much better than most analysts had expected. John Moore of BRC Brewin Dolphin called it “a classic recovery story”.

“More people are starting to travel again and the airline has changed its routes and offerings,” he said. “Fuel costs are still a hurdle for easyJet and consumer confidence is a potential deterrent, but the company is relatively well protected and bookings for the coming year are strong.”

Mr Moore added that with a current market capitalization of around £3.4bn, easyJet could return to the FTSE 100 UK list if it lives up to expectations.

READ MORE: Travel Scotland: easyJet launches three new routes for summer 2023

Yesterday’s share price jump, which rose more than 10% to 516.6p, has led to a rise of more than 50% this year as investors welcomed growing signs that travel demand is weathering the cost-of-living crisis. Mr. Lundgren noted that passengers prefer destinations such as Turkey or Egypt, which offer value for money.

Higher fuel prices pushed costs up 48% in the three months to December 31, but revenue per seat rose 36%, reflecting fuller aircraft and higher ticket yields. There was also a 20% increase in ancillary revenues such as additional charges for extra legroom or meals, accounting for £406m of the group’s first-quarter revenue of £1.5bn.

The carrier carried 20.2 million passengers during the quarter, in line with previous plans, increasing passenger numbers to 17.5 million from 11.9 million in the same period a year earlier.

The airline plans to gradually expand its flight schedule in the coming months and return to pre-pandemic levels in time for the peak summer months of July to September.

“To summarize, we expect our winter losses to be significantly reduced in the first half of the year compared to last year,” Mr. Lundgren said.

“This will set us firmly on a path to full year earnings where we expect to beat current market expectations, allowing us to create value for customers, investors and the economy we serve.”

Loss before tax in the three months to the end of December, when the industry traditionally goes into negative territory, amounted to 133 million pounds. This was a significant improvement from the last three months of 2021 when easyJet posted a loss of £213m.

Sophie Lund-Yates of Hargreaves Lansdown said the rising wave of travel demand will lift all carriers in the sector. However, there are also some easyJet-specific elements in the story.

“The group has been particularly successful in selling value-added services to existing passengers,” she said in a note to investors.

“The so-called extra income is things like extra luggage, legroom and food. This is a growing and very profitable area and the growth has been impressive.”

She added that easyJet’s ability to sell these add-ons and drive strong demand stems from its focus on large airports, which sets it apart from other low-cost airlines that cut costs by flying in and out of smaller, less convenient destinations.

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