The welcome return of the dividend back in November when easyJet reported its full year numbers appears to have been the catalyst for some solid share price gains with the shares retesting their 2023 highs earlier this month, having fallen to 10-month lows back in October.
While this is welcome it’s hard to ignore the fact that the easyJet share price has struggled to get anywhere near the highs we saw in 2021 which then saw a decline to ten-year lows in 2022.
In fact, the current rebound still has us well below the 2022 peaks in a sign that while the recovery in the share price is welcome the shares have lagged well behind the likes of Ryanair whose shares have recovered all their post pandemic declines and managed to post new record highs at the end of last year.
With the shares over 50% below their pre-pandemic peaks and the fact that easyJet returned to profit last year due to a decent performance in H2 there is certainly scope for further share price gains if the progress made last year is carried over into 2024.
Today’s Q1 trading update has seen easyJet report a headline loss before tax of £126m which is a modest improvement on the £133m loss a year ago. The number of passengers saw an increase of 14% over the period with revenue per seat rising 3%.
Total revenue saw a 22% increase to £1.8bn with strong growth in ancillaries of 20%, while holidays revenue jumped 95% to £181m, although total costs per seat rose by 2% to £77.2m
easyJet holidays has been the standout performer here managing to more than double its profits to £30m from £13m. While this is welcome the improvement here serves to mask a bigger loss in the rest of the business.
In its defence the airline can argue that the conflict in the Middle East hasn’t helped given that bookings in the region have fallen off, along with the various flight suspensions, which has meant that revenues here have declined even if costs haven’t.
Like last year easyJet appears to be banking on a similar strong H2 to offset the impact of a loss-making H1 with the number of seats expected to grow sharply from 42m in H1 to 59m seats in H2
Early indications suggest that the airline is on course to do this saying it expects its H1 loss to improve, despite the £40m impact caused by disruption due to tensions in the Middle East.
It is clear from today’s numbers that were it not for the easyJet holidays business which is going from strength to strength that it might struggle to match the profitability we saw last year when the airline returned a total profit after tax of £324m.
easyJet maintained its guidance of 35% growth in its holidays business in 2024 which would take its UK market share to 7%.
This has helped to push the shares to their highest levels since June 2022 in early trade.
Also, on a brighter note revenue per seat for the second half of 2024 is currently ahead of last years levels, which means that while the airline is heading in the right direction albeit with a bit of turbulence, it still has some way to go to match the performance in Ryanair, which is way ahead in terms of revenues and profitability.
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