Holiday not yet over for Jet2 investors

Jet2 (JET2) enjoyed another bumper summer, displaying few signs that it had suffered the same level of pricing pressure as peers.

Even after increasing capacity by 13 per cent, it filled most of its planes. Total passenger numbers were up 11 per cent, and the number of higher-margin holiday package customers grew by 8 per cent. Prices also increased by 6 per cent as “supply-led inflationary increases were passed on”.

Flight-only passenger numbers were up 18 per cent, so although ticket yields softened by 1 per cent to £131, the overall increase in numbers meant its total margin improved.

Indeed, the group’s profit before tax and currency fluctuations grew by 16 per cent to £772mn, which was around £150mn higher than consensus forecasts. Even though the company will declare a loss during the quieter winter period, therefore, full-year earnings are also on track to beat forecasts. 

Jet2 took delivery of 10 new Airbus A321neo planes during the period, which will help it to increase capacity by a further 9 per cent next summer. The increased capex involved isn’t (at least for now) an issue, given a net cash balance of £2.3bn (or £984mn if customer deposits and leases are excluded). The main concern is therefore whether Jet2 can continue to fill the extra seats. It has been helped this year by the fact that rivals, including Ryanair (IE:RYA) and Wizz Air (WIZZ), have had their own expansion plans curtailed by supply chain problems. 

Both management and analysts remain confident, with the latter group forecasting a 6 per cent increase in earnings per share this year, followed by 5 per cent next. With the shares trading at less than eight times forecast earnings, we also remain upbeat. Buy.

Last IC view: Buy, 1,343p, 11 Jul 2024