The rebound in travel anticipated last year as the Omicron wave of the coronavirus subsided took a lot longer to get off the ground than anticipated, but we’re getting there. In Europe, air traffic for the first three weeks of 2023 reached 86 per cent of 2019 levels, according to Eurocontrol.
Low-cost carriers have been among the most active players. Ryanair’s (IE: RYA) daily flight numbers last week were at 114 per cent of pre-pandemic levels.
EasyJet (EZJ) has been slower off the mark. Its daily flight numbers last week were only at 63 per cent of 2019 levels, according to Eurocontrol.
Not all of this is its fault, and the airline has been unlucky in terms of the fact that two of its main hubs – London Gatwick and Amsterdam – imposed capacity restrictions last summer to cope with the ramp-up in activity. Amsterdam’s limits are still in place until April.
The airline’s first quarter trading update, for the final three months of 2022, shows clear progress, though. Although it recorded another three-figure headline loss of £133mn, this was a £100mn improvement on the Covid-disrupted period a year earlier. Passenger numbers grew by 47 per cent year, and revenue per seat was up by 36 per cent. The average load factor (the ratio of passengers to available seats) rose by 10 per cent and ticket yield grew by 21 per cent.
On top of this, the company made more from add-ons – airline ancillary revenue also grew by 36 per cent, to £20.12 per seat.
Its holidays arm (which launched at the end of 2019 but only really began operating in earnest last year) generated a £13mn profit, up from a loss of £1mn a year earlier. Demand from UK holidaymakers is strong, with 60 per cent of the summer holidays it had planned to sell already booked. This was based on the company growing customer numbers by 30 per cent this year but given the response it has now lifted this target to 50 per cent.
Chief executive Johan Lundgren said that it expects losses during the winter “to reduce significantly” when compared with last year, meaning that over the full year to September it expects to beat the market’s current consensus of a £126mn pre-tax profit.
Our buy idea on easyJet last month looks well-timed. Since then, the airline's shares have jumped by 50 per cent and although they currently trade at almost 27-times FactSet’s consensus forecast earnings – well above their five-year average – the company is still in the early stages of its recovery. On next year's consensus forecast of around 36p a share, they trade at a much more reasonable-looking 14-times earnings. We maintain our Buy at 517p.
