Will easyJet’s share price fly higher after full year results?

EasyJet is expected to post a headline pre-tax loss when it updates the market with full-year results on Tuesday. The losses follow a summer of disruption for the airline industry that led to flights being cancelled, dashing hopes of a post-pandemic recovery. The outlook for next year and possible takeover rumours will be closely watched in the results.

EasyJet’s [EZJ.L] share price hasn’t exactly been flying high this year. Soaring fuel costs, inflationary pressures and the war in Ukraine have taken their toll on easyJet’s stock, which has fallen sharply over the course of 2022. Not helping matters is a summer of chaos in the travel industry that has led to substantial losses for the low-cost carrier.

In theory, the summer of 2022 should have seen the airline industry bounce back after the doom and gloom of the pandemic. That wasn’t to be as the airlines and airport infrastructure buckled under the surge in demand from holiday makers. 

EasyJet was forced to cancel 10,000 flights between July and September, while IAG-owned [IAG.L] British Airways cancelled 30,000 between April and October. The impact was felt in easyJet’s third quarter results, where the carrier reported a £114m pre-tax loss for the quarter.

Expect to see the impact of this chaos featured in easyJet’s full year earnings on Tuesday, with the carrier already guiding for a pre-tax loss.

What’s happening with easyJet’s share price

EasyJet’s share price has plummeted 27.18% this year, closing Friday 25 November at 402.7p. The performance lags behind IAG’s 6.01% decline over the same period, but is better than Wizz Air’s [WIZZ.L] 47.13% collapse.

However, easyJet’s share price has gained over 42% since the publication of a trading update on 13 October, while early November reports of a possible takeover by IAG have further supported the stock. Shareholders will be hoping that a positive update on Tuesday fuels this momentum.

What to expect in easyJet’s full year results

EasyJet expects pre-tax losses for full year 2022 to come in at between £170m and £190m, which includes a £64m FX loss due to a balance sheet revelation, and £75m lost due to industry-wide disruption in the third quarter. Money made from additional services will also be worth keeping tabs on. At a group level, easyJet Holidays before tax is expected to have generated over £35m this year.

For the fourth quarter, easyJet said it expects headline earnings before tax to be between £525m and £545m, in a trading update published 13 October.  During the quarter, easyJet reported 26.3 million seats had been sold and was operating at 88% of 2019 capacity (the last comparable period before the pandemic).

Any sign that easyJet expects a reduction in disruption next year will be welcomed by shareholders. In the reported period, the airline industry was affected by the outbreak of Omicron, the war in the Ukraine and industry-wide disruption over the lucrative summer period. 

For the first quarter 2023, easyJet expects to fly 20 million passengers, a 30% year-on-year increase in capacity, with October half-term and Christmas periods back to pre-pandemic levels. Johan Lundgren, CEO of easyJet, said that bookings for next year’s summer season “were filling the equivalent of more than four A320 aircraft a minute” after going on sale, “demonstrating the continued demand”.

Mooted IAG takeover

EasyJet’s share price surged at the start of November as news broke of a mooted takeover by International Consolidated Airlines (IAG). According to The Times, IAG could potentially take over easyJet as an additional revenue stream to plug the gap in lost revenue from a decline in business travel following the pandemic.

“Owning EasyJet would significantly boost International Consolidated Airlines’ position in the leisure market and give it access to many prized airport landing slots,” said AJ Bell Investment Director Russ Mould.

Mould added that a barrier to the deal could be IAG’s debt levels, with shareholders preferring that the BA-owner pays this down “rather than spending billions on buying another airline such as easyJet”.  Any further update on a possible takeover will be keenly watched in this week’s results presentation.

As it stands, easyJet’s share price carries a median 12-month price target of 472p from analysts polled by Refiniv. Hitting this would represent a 17% upside on Friday’s close.