EasyJet shares fall despite return of dividend

easyJet posted a healthy trading statement, with profit before tax for the fourth quarter expected to be at record levels and the company is reinstating its dividend payments. The airline says Q4 profits are forecast to be between £650 million and £670 million.

“We have delivered a record summer with strong demand for EasyJet’s flights and holidays with customers choosing us for our network, value and service,” chief executive officer Johan Lundgren, told investors. “This performance has demonstrated that our strategy is achieving results and so today we have set out an ambitious roadmap to serve more customers and deliver attractive shareholder returns, underpinned by a continued focus on costs and operational excellence.”

EasyJet: dividend set to return

The airline plans to pay dividends of 10% of headline profits after tax for 2023, rising to 20% in 2024. It also unveiled its ambitious target to generate profits greater than £1 billion. Lundgren says this will be delivered by cutting winter losses, growing the EasyJet Holidays business and upgrading its fleet.

However, its shares dipped by 4% on Thursday and a further 4% on Friday, as analysts reportedly remained sceptical of its internal target to achieve profits of £1 billion. The Israel-Hamas conflict in the Middle East is also weighing on airline shares as oil prices increase. The company halted all flights to Tel Aviv earlier this week.

EasyJet says it has seen passenger growth of 8% year on year, while ticket yield per passenger has risen by 9%. As such, the company expects profit before tax of between £440 million and £460 million for the full year 2023. Fuel prices remained flat during the period.

The winter season is typically slower than the summer period. However the airline says capacity is 15% ahead of last year and that its EasyJet Holidays arm should generate profit before tax of £120 million for the full year 2023.

EasyJet buying new Airbus planes

Meanwhile, EasyJet is also snapping up 157 new aircraft, subject to shareholder approval, at a cost of $19.9 million over a number of years. The new Airbus planes are expected to be delivered between 2029 and 2034. The company already has 158 aircraft on order for 2029.

Analysts at broker Deutsche Bank recently trimmed their price target on the shares to 585p from 635p and currently have a buy recommendation on the stock.

The shares have had a good run, rising 34% this year to 391.2p. As such, investors may want to take some profits, given the current uncertainty over the Israel-Hamas war and its likely effect on fuel prices. Nevertheless, the recent dip may also be a buying opportunity for new investors.

Past performance is not a guide to future returns.