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EasyJet To Benefit As Demand For Air Travel Picks Up?

By CMC Markets (Michael Hewson)Stock MarketsMay 19, 2022 10:39
uk.investing.com/analysis/easyjet-to-benefit-as-demand-for-air-travel-picks-up-200519256
EasyJet To Benefit As Demand For Air Travel Picks Up?
By CMC Markets (Michael Hewson)   |  May 19, 2022 10:39
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Despite the loosening of travel restrictions and increase in flying hours over the last few months the easyJet (LON:EZJ) share price has struggled this year, hitting 18-month lows in the aftermath of the Ukraine war.

Having undergone two years of disruption as a result of COVID-related travel restrictions, Russia's invasion of Ukraine, which has exacerbated the surge in fuel prices and other costs, is yet another challenge for the beleaguered travel industry.

While we’ve seen a modest rebound in the easyJet share price since early March, the rally has stuttered on concerns that while passenger numbers have risen to 23.4 million, and revenue per seat is up 28.9% to £47.61, costs have risen even faster.

Half-year results announcement lays focus on outlook

EasyJet said on Thursday said it expected to fly at 90% of its pre-pandemic schedule from April to June, and at 97% in the following quarter. For the second half of the year, forward bookings are 76% sold for Q3, and 36% sold for Q4.

For the six months to the end of March, group headline costs rose 117% to just over £2 billion, while revenues rose 524% to £1.5 billion. The headline loss before tax came in at £545m, in line with expectations. Load factor for the first half grew to 77%, up from 63.7% a year ago, with Easter seeing load factors rise to 90%.

On fuel costs, the airline has improved its hedging capacity to 71% at $619 for the second half of the year and is hedged at 49% for the first half of 2023 at $701.

All of this suggests a promising outlook for one of the UK’s biggest domestic carriers. However, the first half wasn't without its challenges, with the airline taking the decision to sell and lease back another 10 of its A319 aircraft, bringing the number of aircraft leased out to 144, out of total aircraft of 322.

Staff shortages

Earlier in May, easyJet said that it would remove seats from its A319 fleet to operate with fewer cabin crew as it seeks to prevent a repeat of this Easter’s travel chaos, when the budget airline cancelled hundreds of flights because staff were absent with COVID.

The aircraft refits will limit capacity to 150 passengers, enabling easyJet to fly the planes with three cabin crew instead of four. The airline is trying to hire new cabin crew to replace the staff it laid off during the pandemic, but staff shortages are expected to remain a problem for the next 12 months.

There is a risk that the rising cost of living will deter would-be passengers from flying, while easyJet's costs for the second half are likely to be higher as well.

Consequently, given the range of financial uncertainties, easyJet didn't provide financial guidance for the rest of the year.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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EasyJet To Benefit As Demand For Air Travel Picks Up?
 

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EasyJet To Benefit As Demand For Air Travel Picks Up?

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