EasyJet profits takeoff on booming travel demand as it cashes in on higher ticket prices and rakes in a third more from paid-for extras
- Profit for the year to the end of September will exceed £260m, EasyJet said
- Revenue per seat up 42% in first half, ancillary revenues up 34%
- Holiday division saw revenues triple and is currently 80% sold for this summer
Easyjet has lifted profit expectations on the back of ‘strong’ summer bookings, in the latest sign that demand for travel is holding up despite the cost of living crisis.
The airline said profit for the year to the end of September will exceed market expectations of £260million, partly thanks to higher ticket prices and rising ancillary revenues such as baggage fees and on-board food.
The revenue it makes for each passenger seat rose 42 per cent to £46 in the first half to the end of March, while ancillary revenue per passenger, or cash spent on paid-for extras, surged 34 per cent to £20.
Flying high: EasyJet said customers prioritise spending on travel despite stretched budgets
This means the group now expects revenues for the half-year to rise 80 per cent to £2.7billion, as headline losses narrow by £120million to between £405million and £425million.
Its holiday division, which was launched just before the pandemic and allows customers to book European hotels alongside easyJet flights, saw revenues triple in the first half and is currently 80 per cent sold for this summer.
EasyJet now expects the division to grow by around 60 per cent this year, up from previous forecasts of 50 per cent growth.
Chief executive Johan Lundgren said: ‘We see continued strong booking momentum into summer as customers prioritise spending on travel and choose airlines like easyJet offering the best value and destination mix, as well as easyJet holidays which is continuing its steep growth trajectory as the fastest growing holidays company in the UK.
‘All of this means easyJet expects to outperform FY23 market expectations.’
EasyJet shares surged 3 per cent to 526p in morning trading on Tuesday. They have now risen almost 60 per cent since the start of the year, but they are still down 11 per cent compared to 12 months ago.
Airlines and holiday companies have reported robust summer bookings in recent weeks despite high inflation squeezing household budgets.
Earlier this month, package holiday operator Tui said customers were unwilling to give up holidays after reporting strong Easter bookings to sunny destinations.
EasyJet flew around 1,600 flights per day over the Easter break, despite French strikes, with capacity back around pre pandemic levels in the UK.
Passenger numbers reached 15.6million during the first three months of the year, up by more than a third from 11.6million during the same period in 2022.
John Moore, senior investment manager at RBC Brewin Dolphin, said there are real signs the company is ‘turning a corner after a few bad years’.
‘Taking more of a “Ryanair approach” to routes, baggage allowances, and staff shifts has helped to protect yields and margins, and the airline is well hedged in terms of fuel costs,’ he added.
Richard Hunter, head of markets at Interactive Investor, noted that while EasyJet’s holiday division only accounts for 7 per cent of group revenues, its strong performance means the offering is ‘clearly playing into the minds and wallets of cost-conscious consumers’.
‘The challenges of a stalling UK economy could transfer to customer propensity to spend, but while EasyJet is not at the extreme discount end of the market, it remains appealing to the main market and EasyJet Holidays is showing signs of adding another dimension,’ he said.
