Jet2 has raised its full-year earnings outlook after turning a profit in the first half, new results show.
In the six months to 30 September, the tour company posted a pre-tax profit of £450.7 million compared to a loss of £205.8 million year-on-year.
The Leeds-based airline saw its revenues rise 730 per cent to £3.6bn by the end of the half year.
The group said it was facing compensation payments to customers totaling more than £50m after disruption this summer, which spread across multiple airlines and airports in the UK and beyond this summer.
Compensation: Jet2 faces paying compensation totaling more than £50m amid travel chaos this summer
Revenue per passenger for the airline’s flights alone rose to £105, up from £73.27 a year ago, representing a 43 per cent increase.
Jet2 said the increase in ticket returns was “due to changes in the mix of destinations flown, particularly those in the Eastern Mediterranean, and strong consumer demand, requiring fewer promotional offers.”
The average price of a Jet2holidays package holiday rose 5 per cent to £782 from £748 a year ago, ‘due to inflationary cost increases and favorable pricing driven by destination mix and robust consumer demand’.
However, the group added: “Our business was directly impacted by the wider disruption in the airline industry and its supply chains in mid-summer, as widely reported in the media, leading to significant delays and compensation costs of more than £50 million.’
The airline said seat capacity increased by 14 percent from summer 2019, adding that ‘buzzy’ customer demand meant the company achieved an average occupancy rate of 90.7 percent, up from 93.1 percent in 2019 before the pandemic.
Executive Chairman Philip Meeson said: “Our Leisure Travel business has continued the encouraging recovery following the reopening of international travel in early 2022.
“Strong customer demand, particularly for package holidays, plus a robust pricing environment and well-considered cost control, have laid the foundations for significantly improved financial performance compared to the recent Covid-affected summer seasons, but also compared to pre-Covid Summer 2019. ‘
Shifts: A chart showing Jet2’s share price movements over the past year
Looking ahead: easyJet will publish its annual results on 29 November
Jet2 also said that with encouraging bookings for winter 2022/23 and robust pricing, it was on track to exceed current market expectations for full year earnings.
Looking ahead, Jet2 said: “The Group faces input cost pressures including fuel, carbon, a stronger US dollar and wage increases, plus investments to ensure our colleagues can thrive and live balanced lifestyles, further supporting our operational resilience .
‘We conclude from this that margins could come under pressure.’
It added: “As is typical for the company, losses are to be expected in the second half of the fiscal year.”
The group’s board of directors said it plans to pay an interim dividend of 3 pence per share to shareholders, up from zero a year ago. The dividend will be paid on February 3, 2023 to shareholders registered on December 30, 2022, with an ex-dividend date of December 29, 2022.
Jet2 Shares rose today and rose 3.32 percent or 29.60 p this afternoon to 921.40 p, after falling more than 17 percent in the past year.
Russ Mould, director of investment at AJ Bell, said: ‘Airlines are now reaching the point where they can report earnings that reflect life after Covid, where travelers have had a chance to receive the vaccine and boosters. However, as one headwind passed, another arrived in the form of airport disruption with a lack of staff, causing chaos in flight schedules and the entire travel experience.
“Against this backdrop, Jet2 has performed remarkably well, with profits well above the pre-Covid days thanks to pent-up travel demand, increased capacity to fly customers abroad and a higher percentage of revenue coming from customers with a higher margin holding packages. It’s also had to run fewer promotions, which has saved a few pounds on marketing costs and helped avoid major margin dilution.
“Despite Jet2 having to pay significant compensation payments for the mid-summer flight disruption, Jet2 can’t really grumble about its latest financial performance. However, it won’t be plain sailing from here.’
Rival easyJet will publish its annual figures on November 29. easyJet shares rose 2.51 percent or 9.70 p this afternoon to 396.30 p. Shares of the airline are down more than 28 percent in the past year.
Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown, said: “EasyJet expected capacity to return to pre-pandemic levels by the mid-October and Christmas. Next week, investors will find out if this was a fair prediction. This will be a crucial barometer of the group’s performance in the coming year. Many are cautiously optimistic that it can meet this goal.
“The other thing that will be monitored is the size of the losses for the full year. These are expected to be between £170m and £190m, due to unfavorable exchange rates and third quarter disruptions and cancellations. A worse-than-expected showing on this front will not be well received by the market.”
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