Sunday, 19 May 2024


How easyJet’s bet on holidays paid off By Reuters

How easyJet's bet on holidays paid off By Reuters

By Joanna Plucinska

LONDON (Reuters) – EasyJet’s big bets on package holidays and better-located airports are helping it win customers, its CEO and investors say, even as concerns linger about the high cost of the strategy for an airline known for its no-frills service.

The turnaround is part of a years-long effort by CEO Johan Lundgren to cut debt, revive the share price, and restore revenues after the pandemic.

Buying slots at better-located airports like London’s Gatwick is paying off. As ticket prices have increased in recent years, that’s appealing to consumers looking for a slightly higher quality travel experience than budget rivals Ryanair and Wizz Air.

The holiday package business, which launched in 2019 and accounted for more than a quarter of group pretax profit last year, is benefiting from a post-lockdown shift in consumer priorities towards vacations. In 2023, easyJet (LON:) cleared its net debt to deliver net cash of 41 million pounds ($52 million).

“It definitely wasn’t luck,” said Davy analyst Stephen Furlong.

Last month, the British airline forecast a smaller-than-expected first-half loss and another strong summer. It will report first-half results on Thursday.

The stock has risen 8% over the last year, outpacing the global airline index, and rejoined London’s blue-chip .

Some other airlines, meanwhile, are struggling to recover from the COVID crisis when planes were grounded and borders shut, and the industry faces headwinds from high wages to volatile jet fuel costs.

Lundgren, a former tour guide who wanted to be a professional trombonist and joined in 2017 from Europe’s top tour operator TUI, is targeting profit per seat of 7-10 pounds by 2028, almost double 2019 levels.

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In an interview in March, he said a surge in demand for travel was driving growth, but chance had played a part too.

By flying Airbus planes with CFM engines, easyJet has dodged the slowdown in deliveries from Boeing (NYSE:) and the Pratt & Whitney engine recall that has grounded some planes at Wizz Air and others.

That means easyJet can capitalise on what is set to be a record summer for travel in Europe and benefit further from its holiday business’ profitability.

“You can see that easyJet is growing more than any other European airline in Europe. We’re growing at around 8% (for capacity),” Lundgren said.

“We are now … in a net cash position, basically, through a big,…

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