Are easyJet shares about to take off?

easyJet (LON: EZJ) shares were changing hands for less than 300p during parts of 2022, shot up to 575p at the start of February 2024, and have now corrected to 526p apiece. The airline was, of course, significantly affected by the pandemic — but could be set for a strong 2024.

easyJet share price: trading update

Yesterday’s update covering the six months to 31 March saw the airline reduce winter losses by more than £50 million compared to the same period this time last year. For context, its headline loss before tax is expected to be in the region of £340 million to £360 million.

Further, passenger numbers rose by 8%, ticket yield by 9%, and ancillary yield by 10% year-over-year.
The company also generated 206% more profit before tax, some £31 million, from its holidays segment — and expects the division to experience more than 35% customer growth in the full financial year.

In capacity terms, growth remains on track, with circa 59 million seats on sale in H2 2024, an 8% increase year-over-year. Easter demand was particularly strong, benefitting March income due to its early timing at the end of the month.

CEO Johan Lundgren enthused that ‘we have further enhanced our network with the launch of new bases in Alicante and Birmingham providing greater choice for consumers across Europe. “We are well set up operationally for this summer season where we expect easyJet to be one of the fastest growing major airlines in Europe and take more customers on easyJet holidays than ever before.’

Where next for easyJet shares?

easyJet, like most UK airlines, generates far more revenue in the summer than the winter. While reduced losses over the past six months is welcome, positive forward guidance is equally important. The company noted that ‘bookings for summer 2024 continue to build well, with an increase in volume and pricing compared to the same period last year, underpinned by strong demand for easyJet’s primary airport network.’

Holidays remains a highlight, with 70% of the plan already sold for the summer months.

Interestingly, the company is starting to pay out a small dividend again, while also continuing its growth trajectory. This could suggest confidence in future profitability, but perhaps the key risk remains geopolitical instability.

Brent Crude stands at a historically elevated $87 per barrel and could rise further if tensions between Israel and Iran — which have already escalated into small-scale weaponry exchanges — worsen. Further, while inflation has come down markedly, central bankers across the western hemisphere continue to remain cautious. Rate cuts may be on the way, but analysts argue that the timing of them has already been pushed back by several months.

Positively, easyJet had already announced it plans to buy almost 160 new airplanes over the next decade, but again, this could serve to only heighten both the risks and the rewards dependent on wider macroeconomic movements.

Taking a holistic view of easyJet, the company has crafted a strategy that perhaps sets it apart from competitors. Ancillary revenue — for extras like additional luggage or food — continues to rise, and the holidays growth suggests the airline can continue to grow an additional high margin line of business.

This is arguably down to the company’s strategy of focusing on large airports within profitable Western European routes, rather than adopting competitor plans of flying between smaller airports, further from desired customer destinations.

With travel demand seemingly strong, easyJet could be set for a strong summer season later in 2024.