easyJet shares were up 0.4% to 502.3p in early morning trading on Thursday, after the budget airline reported a narrowed pre-tax loss of £545 million in its HY1 2022 results compared to £701 million in HY1 2021.
The travel company struck an upbeat tone with a revenue growth of 524% to £1,498 million against £240 million year-on-year on the back of its increase in capacity flows and ancillary products, which delivered continuous incremental revenue.
easyJet noted a 117% increase in group headline costs to £2 billion compared to £941 million the last year, as a result of the firm’s increase in flown capacity.
Passenger Recovery
easyJet commented that it had allocated aircraft to markets where it experienced the strongest demand, alongside measures to transform its ancillary offering to deliver a growth in revenue without cannibalising its ticket sales.
“easyJet has reduced its losses year on year, at the better end of guidance. The pent-up demand and removal of travel restrictions provided for a strong and sustained recovery in trading which has been further boosted as result of our actions,” said easyJet CEO Johan Lundgren.
“These include the radical reallocation of aircraft which has seen more than 1.5m seats moved to the best performing markets and the step-change in our ancillary products delivering increased revenue – both of which have contributed to our total yield increasing by 9% compared to the same period in FY19.”
“All of this is not only delivering now but with more to come in the future as even more passengers take to the skies.”
The company announced that forward bookings for Q3 were 76% sold, with 36% booked for Q4 along with ticket yields for the quarter 15% above 2019, and load factors estimated above 90%.
easyJet said Q3 capacity was anticipated to be 90% of FY2019, alongside a 97% capacity of pre-pandemic levels across Q4 2022.
The airline firm also noted a 6% growth in bookings over the past 10 weeks compared to the same term in 2019, with load factors of 90% across the Easter holidays this year.
easyJet announced that leisure travel demand picked up alongside domestic capacities, with HY1 2022 leisure at 113% of FY 2019 capacity and domestic at 104% of FY 2019 levels.
Meanwhile, the company reported a 70% rate of sale in its holidays business, with the sector on track to deliver a medium-term goal of £100 million.
“Since Easter we have been flying up to a quarter of a million customers and 1600 flights every day and in the second half leisure and domestic capacity will be above 2019 levels,” said Lundgren.
“It has been well documented that the industry is experiencing some operational issues so, as you would expect, we have been absolutely focused on taking action to ensure we have strengthened our operational resilience for this summer so we can deliver a great, reliable operation to our customers.”
“We expect to operate 90% of FY19 capacity in Q3 and we have capacity on sale of around 97% of FY19 flying in Q4 with easyJet holidays now on track to carry over 1.1 million customers this financial year.”
Fuel
The budget travel group confirmed its fuel was 71% hedged for HY2 2022 at $619 per metric tonne, 49% hedged for HY1 2023 at $701 and 20% hedged for HY2 2023 at $807.
The spot price was approximately $1,225 per metric tonne on 17 May 2022.
easyJet highlighted that its carbon obligation for calendar year 2022 was 100% covered at €19 per metric tonne.
Inflation sees gloomy skies
However, easyJet caveated its positive report with a nod to the short-term uncertainty of the global economic situation, which has seen inflation sweep the UK and bite chunks out of consumers’ wallets, especially the potential cost of travel plans.
The firm commented that it had some level of uncertainty concerning its summer earnings, and said it would not provide any further financial guidance for the year, as a result of continued levels of unpredictability in the coming months.
“The group’s also confident that the cost-of-living crisis isn’t touching performance,” said Hargreaves Lansdown equity analyst Sophie Lund-Yates.
“It was quick to point out that holidays are more important to people these days, after two years without travel abroad.”
“This idea does ring true to some extent, but there’s no getting away from the fact that if faced with a recession, a holiday – whether a hop down the road or a city break to Prague, simply isn’t going to happen for millions of people. This isn’t a flashing red indicator at this juncture, but it’s something to keep one eye on.”
