EasyJet shares jump as analysts eye profit boost from falling fuel costs
- Peel Hunt expects EasyJet to grow its pre-tax profits by 3-5% in the 25/26 year
- EasyJet’s headline pre-tax profits jumped to £610m in the year to September
EasyJet shares rose on Tuesday after a broker issued an upgrade on expectations that the airline’s profits will benefit from lower fuel costs next year.
Peel Hunt upped EasyJet’s target price from 850p to 900p, reflecting forecasts for pre-tax profits to grow by 3 to 5 per cent in the 2025/26 financial year.
EasyJet’s headline pre-tax profits jumped by more than a third to £610million in the 12 months ending 30 September, thanks to rising passenger demand and the popularity of its package holidays.
A total of 89.7 million people travelled with the airline, an 8 per cent year-on-year increase, as consumers prioritised spending on vacations amidst widespread cost-of-living pressures.
There was a 36 per cent surge in customers booking with EasyJet Holidays, which helped the package holiday division’s turnover climb by 47 per cent to around £1.1billion.
Flying away: EasyJet’s headline pre-tax profits jumped by more than a third to £610million in the 12 months ending 30 September
Higher passenger numbers also boosted the group’s ancillary sales by 13 per cent to just under £2.5billion, with a further benefit deriving from cabin bags and leisure bundles.
As a result, EasyJet’s overall revenue expanded by 14 per cent to £9.3billion, while its net cash soared from £41million to £181million.
Having expanded its annual capacity to over 100 million, the company expects to boost this to 103 million in the 2025 financial year, supported by a 6 per cent rise in average journey lengths.
It further anticipates shrinking its winter losses, having already cut them by £40million last year through what it called a ‘mix of productivity and utilisation benefits’.
Peel Hunt said on Tuesday that ‘robust leisure demand’ for winter sun destinations like Cape Verde and the Canary Islands and sustained interest in traditional winter locations for the northern lights and Christmas markets will reduce such losses.
EasyJet’s full-year results will be the last under the leadership of Johan Lundgren, who is standing down at the start of 2025 after seven years in charge.
Lundgren’s tenure has been tumultuous, corresponding with the Covid-19 pandemic bringing global air travel to a virtual standstill and causing huge financial losses for airlines.
However, while EasyJet posted its first-ever annual losses since being founded in 1995, the firm has rebounded strongly, achieving consecutive record summer profits over the past two years.
Lundgren’s replacement is EasyJet’s current chief financial officer, Kenton Jarvis, who was previously head of aviation at tourism giant TUI Group.
Jarvis will have the task of getting EasyJet closer to its medium-term goal of over £1billion in annual pre-tax profits.
EasyJet shares were 3.6 per cent up at 566.4p on late Tuesday afternoon, although they have still more than halved from their pre-pandemic levels.
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