Budget airline easyJet is on course for a return to profitability after three years of pandemic losses, with “strong and sustained” demand for travel despite the cost-of-living crisis.

The company reported a return to the traditional January boom in bookings, hitting record numbers on several days. As a result, it expects to beat market expectations for profits this year.

“We have seen strong and sustained demand for travel over the first quarter, carrying almost 50 per cent more customers compared with last year,” chief executive Johan Lundgren said in a trading update to shareholders.

“Many returned to make bookings during the traditional turn of year sale where we filled five aircraft every minute in the peak hours, which culminated in three record-breaking weekends for sales revenue this month.”

The Herald: Johan LundgrenJohan Lundgren (Image: PA)

Fares have soared by almost a quarter for this year’s Easter holidays with like-for-like prices currently up 24% on the same period in 2019, the year before the onset of the pandemic. Demand for travel in the UK has been strong, while the company’s easyJet holidays are already 60% sold for this summer.

Given the prevailing economic difficulties, the figures were much better than most analysts had anticipated. John Moore of BRC Brewin Dolphin described it as a “classic recovery story”.

“More people are beginning to travel again, while the airline has reshaped its routes and proposition,” he said. “Fuel costs continue to be a drag on easyJet and consumer confidence is a potential headwind, but the company is relatively well-hedged and bookings are strong for the year ahead.”

Mr Moore added that at a current market capitalisation of about £3.4 billion, easyJet could return to the FTSE 100 list of the UK’s most valuable companies if it delivers on expectations.

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Yesterday’s jump in share price, up more than 10% at 516.6p, took gains this year to more than 50% as investors welcomed growing signs that demand for travel is withstanding the cost-of-living crunch. Mr Lundgren noted that passengers are favouring destinations such as Turkey or Egypt which offer value for money.

Higher fuel prices drove a 48% increase in costs during the three months to December 31, but revenue per passenger seat rose by 36% reflecting fuller planes and higher ticket yields. There was also a 20% increase in ancillary revenues – such as additional charges for extra leg room or meals – which made up £406m of the group’s first quarter revenues of £1.5bn.

The carrier flew 20.2 million seats during the quarter, in line with previous guidance, with an increase in passenger numbers to 17.5 million from 11.9 million in the same period a year earlier.

The airline plans to progressively expand its flight schedules in the coming months, and return to pre-pandemic levels by the peak summer months between July and September.

 

“In summary, we expect to see our winter loss reduce significantly over the first half compared to last year,” Mr Lundgren said.

“This will set us firmly on the path to delivering a full-year profit, where we anticipate beating the current market expectation enabling us to create value for customers, investors and the economies we serve.”

The pre-tax loss for the three months to the end of December – when the industry traditionally slips into the red – came to £133m. This was a significant improvement on the final three months of 2021, when easyJet made a loss of £213m.

Sophie Lund-Yates of Hargreaves Lansdown said the rising tide of demand for travel will lift all carriers across the sector. However, there are also some elements to the story that are specific to easyJet.

“The group is particularly successful at selling extras to existing passengers,” she said in a note to investors.

“So-called ancillary revenues are things like extra baggage, legroom and food. This is a growing, and highly lucrative area, and the growth has been impressive.”

She added that easyJet’s ability to sell these add-ons and encourage strong demand stems from its focus on major airports, setting it apart from other budget airlines that trim costs by flying in and out of smaller, less convenient destinations.