EasyJet shares are rising as analysts see a profit boost from falling fuel costs

EasyJet shares rose on Tuesday after a broker upgraded expectations that the airline’s profits will benefit from lower fuel costs next year.

Peel Hunt raised EasyJet’s target price to 900 pence from 850 pence, reflecting its forecast of pre-tax profit growth of 3 to 5 per cent in the 2025/26 financial year.

EasyJet’s total pre-tax profits rose by more than a third to £610 million in the 12 months ended September 30, thanks to rising passenger demand and the popularity of its package holidays.

A total of 89.7 million people traveled on the airline, up 8 percent year-on-year, as consumers prioritized holiday spending amid widespread cost-of-living pressures.

There was a 36 percent increase in the number of customers booking with EasyJet Holidays, boosting the package holiday division’s turnover by 47 percent to around £1.1 billion.

Higher passenger numbers also boosted the group’s additional revenue by 13 percent to just under £2.5 billion, with a further benefit coming from hand luggage and leisure bundles.

As a result, EasyJet’s total revenues rose 14 percent to £9.3 billion, while net cash rose from £41 million to £181 million.

After expanding annual capacity to over 100 million, the company expects to increase this to 103 million in fiscal 2025, supported by a 6 percent increase in average trip length.

Furthermore, the country expects to reduce its winter losses, having already cut £40 million last year through what it called a ‘mix of productivity and utilization benefits’.

Peel Hunt said on Tuesday that “robust leisure demand” for winter sun destinations such as Cape Verde and the Canary Islands and continued interest in traditional winter locations for the Northern Lights and Christmas markets will reduce such losses.

EasyJet’s annual results will be the last under the leadership of Johan Lundgren, who will step down in early 2025 after seven years in charge.

Lundgren’s tenure has been tumultuous, mirroring the Covid-19 pandemic that has brought global air travel to a virtual standstill and caused huge financial losses for airlines.

Although EasyJet posted an annual loss for the first time since it was founded in 1995, the company has recovered strongly and achieved consecutive record summer profits over the past two years.

Lundgren’s replacement is current EasyJet chief financial officer Kenton Jarvis, who was previously head of aviation at tourism giant TUI Group.

Jarvis will be tasked with bringing EasyJet closer to its medium-term target of over £1 billion in annual pre-tax profits.

EasyJet shares were 3.6 per cent higher at 566.4p late on Tuesday afternoon, although still more than halved from their pre-pandemic levels.