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Can easyJet’s share price continue to climb higher?

Since the lows of last summer, when the easyJet share price dived as low as 854p in early June, the shares have risen more than 76%, boosted by improvements in passenger numbers as well as higher revenue and profit.

EasyJet posted a 26% decline in its full-year pre-tax profit to £427 million, which was at the top end of forecasts. The low-cost airline group blamed intense competition as well as a more subdued consumer environment for the fall in earnings, but said that forward bookings are “reassuring”.

EasyJet share price boosted by rivals' woes

EasyJet’s share price gains and increase in revenue have undoubtedly been down to the problems facing its peers – as the strikes at British Airways and Ryanair have helped its figures. In total, British Airways were forced to cancel 2,325 flights over two days in September, when pilots walked out in a pay dispute. BA managed to avoid further disruption after agreeing a deal in November with the pilots union, Balpa. Ryanair was also hit by a series of strikes in August and September last year.

Opportunity after Thomas Cook demise

EasyJet will have also reaped the benefits from the breakdown of beleaguered travel agent Thomas Cook, having already paid £36m for the collapsed firm’s slots at Gatwick and Bristol. Thomas Cook’s share price tumbled after the firm endured a string of profit warnings for over a year, going on to become a penny stock in the final phase of its existence.

The demise of Thomas Cook has also benefited Ryanair, after the airline upgraded its numbers earlier this month, having struggled for most of the year due to industrial unrest. Meanwhile the German operator, TUI, added 2 million additional seats for this summer and over half-a-million seats for this winter, as it seeks to profit from a gap in the market. TUI has also added some of Thomas Cook’s hotels to its portfolio. Though comfortably lower than its six-month peaks, TUI’s share price is around 150p higher than it was in September, when the 178-year old Thomas Cook ceased trading.

EasyJet to start package-holiday business

EasyJet still plans to go down the package-holiday route, despite Thomas Cook’s downfall, having increased staff numbers in its package-holiday division from 30 to 40 in the wake of its demise. EasyJet is looking to launch the business in either February or March this year, and it will be particularly interesting to see whether it's able to make a success of it, and likewise what impact it will have on its share price. The firm may have limited success in the long run, with package holidays having tapered off somewhat in popularity for a number of years.

Meanwhile, easyJet said it will restart flights from the UK to Egypt’s Sharm el-Sheikh after a break of almost five years, with two flights a week from Manchester starting in June, and another two flights starting in September, from Gatwick. This follows the UK government’s lifting of an advisory notice against British flights to the destination, after a Russian plane was bombed having just taken off from the resort, killing all 224 passengers on board.


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