Jet2 boss Steve Heapy on how bold pandemic steps helped group become Britain’s biggest tour operator

Jet2 this week approaches the end of its financial year as Britain’s largest tour operator, outpacing rivals amid a tumultuous few years for the travel industry.

The effective overnight shutdown of the travel industry due to Covid-19 in 2020, in addition to subsequent rising costs and airport disruption a year later, has left some operators struggling to regain their pre-pandemic strength .

But Jet2 is entering a new financial year stronger than ever, with much of the groundwork accomplished during the heights of the 2020 lockdowns, CEO Steve Heapy said.

Jet2 was quick to cancel flights and refund customers in cash at the start of the pandemic, distancing itself from some competitors who would later draw the wrath of consumers and regulators for refund denials and delays.

The group also chose to remain fully staffed while supplementing furloughs for the lowest earning workers and implementing temporary pay cuts for the highest earners.

For his part, Heapy only took 70 percent of his salary in 2020.

Jet2 immediately suspended most flights and, where pandemic travel has taken place, Heapy said it worked to ensure the experience was “as normal as possible” while maintaining a fully staffed third-party call center to address customer concerns. unload.

“That’s really helped a lot because we’ve had a lot of customers who have left their previous booking method and come to us,” he says.

“People can handle good news and they can handle bad news, but the killer is uncertainty.”

But Jet2’s main pandemic move was choosing to secure cash early through two equity offerings, a convertible bond offering and the sale of a subsidiary, which together raised around £1bn.

Heapy says: ‘We entered the pandemic with about £1 billion in cash. That’s a lot of money, but we didn’t know how long the pandemic would last or how bad it would be.

‘So [raising capital] helped us take care of our colleagues, customers and supply partners by paying them all on time and in full.

‘It is important that this allowed us to invest while many companies closed their shutters. They didn’t spend any money and quit.

“And we launched into Bristol, a brand new base, while other airlines pulled planes.”

Expansion: Jet2 operates from 10 UK bases and will have 119 aircraft by this summer

Plane to see: What Jet2’s fleet will look like this summer after acquiring new planes

Jet2 has also made significant investments in its fleet, ordering a total of 246 brand new Airbus A321s.

“People probably saw that and thought, ‘Wow, that sucks,'” Heapy says.

‘But if you try to order planes from Boeing or Airbus [because of supply chain issues] the earliest you’re likely to get is 2029.

And the Airbus A321, the greenest aircraft in its class, reduces CO2 emissions with better fuel and fuel combustion. So it is a real investment in the future.’

The impact of the pandemic investment was minimal staff turnover alongside strong customer retention and acquisition.

Jet2 is now the UK’s largest tour operator, licensed to carry 5.85 million customers, surpassing Tui’s 5.33 million and dwarfing On the Beach Travel’s third place with 1.86 million drop, according to Civil Aviation Authority data from February.

Jet2 is also now the third largest UK registered airline and is on track to have 119 aircraft by this summer, with available seats up 7 per cent year-on-year to 15.2 million.

The group was able to revise earnings forecasts in January after revenue bounced back to £505m in the six months to September 2022, from a loss of £195.1m last year, despite widespread travel disruption due to staff shortages last summer.

Heapy says, “We were better prepared [than rivals] for last summer because we went in fully staffed.

“But we were let down by our supply partners in the form of airports, inflight caterers, aircraft cleaners, ground handlers – none of them recruiting at the required level and therefore providing no service.

Due to an outage that spread across multiple airlines and airports in the UK and abroad this summer, Jet2 paid customers compensation totaling more than £50 million.

But, says Heapy, “We were pretty much the only company that didn’t cancel flights due to a lack of resources.

“Most companies were completely unprepared for the summer and the recovery.”

A silver lining, Heapy adds, is that the summer of 2023 “won’t be so bad” because the travel industry will have “learned some lessons.”

He says: “Many companies have rightly been ripped apart by the press, stakeholders and regulators. They won’t make that mistake again.

“A lot of companies don’t invest well – I think almost every company doesn’t seem to invest in customer service.

“But you ruin someone’s holiday at your peril. Holidays are a very big purchase for people on average wages in the UK.’

Heapy adds: ‘But it is a fact that there are fewer workers available for some positions, especially for skilled positions. Many people left the workplace for whatever reason not to return during the pandemic. But Brexit has also deprived us of a huge amount of resources.’

Jet2 Shares are up about 170 per cent from their March 2020 lows in the wake of the UK’s first lockdown at 1,288p.

They remain about 30 percent below their pre-pandemic peak and analysts believe there is more upside potential.

Analysts from Peel Hunt have given the group a ‘buy’ rating with a target price of 1,700 pence, while UBS was targeting 1,420 pence within 12 months of Jet2’s interim results.

Big rival Tui has seen opposing fortunes of late, with shares plunging more than 50 per cent in March following a €1.8bn (£1.6bn) issue with discounted rights to pay off its debts.

But despite losing around £140m for the three months to December 31, Tui along with other operators are pushing for a tentative return to normal trading amid unrestricted travel. It carried 1 million more customers in the quarter than a year earlier, close to 2019 levels, while revenue rose from £2.1bn to £3.35bn.

But the travel sector is still facing inflation and consumer pressures, with Jet2 warning of macro headwinds in January.

Prices have risen and are likely to continue to rise, but Heapy believes customers are willing to pay more even when faced with a cost-of-living crisis.

He says: ‘It’s no secret that prices have risen since the pandemic and that’s because almost every part of the supply chain has been affected by inflation. We’ve seen inflation for fuel, hotels, transfer companies and from governments through taxes.

Every part of the supply chain has had to deal with inflation and of course the price of a holiday, but that doesn’t seem to deter customers.

“They’re still booking and they’re still very eager to leave. They view a vacation as an essential purchase, rather than a discretionary purchase.

“I think the effects of the pandemic probably make it clear that people need a break.”

The group operates 10 UK bases and flies to 21 countries