easyJet has posted its latest financial results this morning, and things are looking up for the short-haul, low-cost carrier. With increasing demand and narrowing losses, the airline is feeling bullish about 2023 and beyond.
A strong financial rebound
easyJet had it tough during the pandemic. With a collapse in demand for travel, along with a large fleet and even larger workforce grounded, the airline came under severe financial pressure. However, with the airline posting stronger results in the announcement today, it would appear that recovery is well underway at the London Luton Airport-based carrier.
The airlines's first quarter financial performance was ahead of expectations as yields strengthened, with revenue per seat (RPS) increasing 36% year on year. For the period October to December 2022 (referred to by the airline as the first quarter of its fiscal year, or Q1), the airline has announced a pretax loss of GBP 133 million (US$166 million) compared with a loss of GBP213 million (US$262 million) for the same period last year.
While a loss is still a loss, this figure represents real progress for the carrier, which has managed to reduce like-for-like losses by GBP 80 million (US$98.4 million) compared to the same period in 2021. Passenger revenue rose to GBP975 million (US$1,199 million) from GBP547 million (US$673 million).
Revenue for the airline was up to GBP1.47 billion (US$1.80 billion) for the period, up significantly from GBP805 million (US$990 million) in the same period of 2021. The company says this was driven by strong demand, the outperformance of ancillary products, along with growth with its easyJet Holidays business.
Speaking about the airline's recent performance, Johan Lundgren, CEO of easyJet, said,
"We have seen strong and sustained demand for travel over the first quarter, carrying almost 50% more customers compared with last year. Many returned to make bookings during the traditional turn-of-year sale, where we filled five aircraft every minute in the peak hours, which culminated in three record-breaking weekends for sales revenue this month.
"This strong booking performance, aided by the airline's step-changed revenue capability, has driven an £80m year-on-year boost in the first quarter with continued momentum as customers prioritize spending on holidays for the year ahead.
"In summary, we expect to see our winter loss reduce significantly over the first half compared to last year. This will set us firmly on the path to delivering a full-year profit, where we anticipate beating the current market expectation enabling us to create value for customers, investors, and the economies we serve."
Ancillary revenues performing well
Analyzing the latest figures, the selling of 'extras' is clearly working well for the airline. Ancillary revenue increased to GBP406 million (US$499 million) from GBP230 million (US$283 million) for the period.
This is particularly impressive and illustrates well how the low-cost airline model employed by the likes of easyJet, Ryanair, and others, relies so heavily on ancillary revenue streams, such as buy-on-board catering, baggage charges, and seating/boarding priority upgrades.
In the Q1 period, easyJet earned GBP20.12 per seat (US$24.74), representing an increase of 36% year on year.
Rising load factors
easyJet said capacity in the period rose as its network recovered and new routes were introduced. The airline flew 20.2 million seats, with an average load factor of 87%. This compares with an average load factor of 77% for the period October to December 2021.
According to figures released by the airline, from October to December 2022, it operated 112,892 flights and flew 17.4 million passengers on an operating fleet of 313 aircraft. These figures compare to 85,618 flights carrying 11.8 million passengers on 251 aircraft for the same period in 2021. This represents an increase in passenger numbers of 47%.
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2023 holidays are selling well
easyJet Holidays is performing particularly well for the easyJet Group. The company remains the UK's fastest-growing holiday company, with a 161% increase year-on-year in customers as demand for travel, particularly in the UK market, remains strong.
easyJet Holidays also upgraded expectations from 30% customer growth to around 50% year-on-year. The company expects strong customer growth throughout the next quarter due to a major advertising turn-of-year holiday sales campaign.
The airline's announcement states that easyJet has seen record-breaking sales revenue in recent weekends as customers rushed to book holidays in places such as the Greek islands and Spain for the summer of 2023.
Looking ahead
All this positivity means that easyJet is feeling bullish about its performance throughout the remainder of its financial year. The airline says it expects to beat the financial market consensus of a pretax profit of GBP126 million (US$155.3 million) for the year.
Moving into the second quarter of this financial year, easyJet expects further revenue per seat growth year-on-year to continue the trend experienced in the first quarter. According to the airline, this is being driven by yield and load factor growth alongside the continued delivery and take-up of ancillary products.
In its statement, the airline puts its more robust performance and predicted success this coming year down to its low-cost proposition at primary airports, "providing a key differentiator for customers making it easy to travel, while offering great value."
The airline also claims that demand for its network is strong, demonstrated through the record turn-of-year bookings. Easter, which sits in the carrier's Q3 financial period this year, is currently trading well according to the carrier, with sold ticket yields up 24% versus Easter 2019, the last Easter not affected by the pandemic.
With strong UK demand, easyJet holidays capacity is now over 60% sold for summer 2023. With holiday sales no longer constrained and considering current levels of demand being experienced, the airline is now expected to see growth of around 50% over the same period of 2022.
Will the success continue?
With these latest results today, easyJet has clearly weathered the COVID-19 storm and is well on its way to rebuilding both its network and its passenger base. Only time will tell whether the carrier can return to profitability this year, although the early indicators are looking good.
Just in recent weeks alone, easyJet has announced a plethora of new routes for the forthcoming northern summer season, the opening of a new European maintenance base, and the signing of a new multi-year partnership with Southend Airport in the UK, which will see it boost capacity at the Essex airport by 30% this summer.
What do you think about this latest set of results? Will easyJet return to profitability this year, in your view? Tell us more in the comments below.