Shares in easyJet closed down nearly 6% last night as the City reacted coolly to a change of leadership at the airline.

Johan Lundgren will step down as chief executive of easyJet in early 2025, having steered its recovery from the coronavirus pandemic. The Swede, who will have led the Luton-based firm for seven years by the time he departs, will be succeeded by Kenton Jarvis, the company’s chief financial officer.

The change was announced as the airline reported it had narrowed first-half losses amid capacity growth and increasing profits at its holidays business, with summer demand shaping up strongly as consumers continue to prioritise travel. It also restored dividend payments to shareholders with a recommended pay-out of 4.5p per share for the first half.

However, shares in the company plunged yesterday, with one analyst suggesting the City is not impressed with the airline's succession planning.

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“EasyJet cannot win over the market despite bouncing back from the pandemic and riding the boom in the travel sector," said Russ Mould, investor director at AJ Bell. "The launch of new routes, ongoing success with its package holidays arm and making more profit per seat are three examples of business success, yet investors aren’t buying it.

“The airline’s shares have taken another lurch downwards on the latest results and news that chief executive Johan Lundgren is stepping down next year. He’s being replaced by finance boss Kenton Jarvis, which suggests a smooth passing of the baton and no change to corporate strategy. The negative share price reaction implies that the market doesn’t approve of the appointment and that investors wanted an outsider to come in and shake things up."

However, Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, suggested it was the “natural time” for Mr Lundgren to leave, “with a strong tenure under his belt and the post-Covid heavy lifting complete”.

easyJet cut first-half losses by £61 million to £350m in the six months ending March 31, which came as revenue leapt by 22% to £3.27 billion. Revenue rose on the back of an increase in flown capacity, pricing strength, and rising sales of ancillary products including easyJet holidays, which reported a 210% rise in profit to £31m as customer numbers rose by 42%. The holidays division is expected to deliver profits before tax in excess of £170m this year.

easyJet said its outlook for the full year was positive, and declared it was on track to deliver its “ambitious” medium target of profit before tax in excess of £1bn.

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Ms Lund-Yates said the results for the first half have “shown reasonable momentum for easyJet, with headline losses before tax reducing by £61m in the third quarter”.

She added: “That’s partly because of cost savings, but also testament to the group’s strong demand and pricing dynamics, which are underpinned by easyJet’s premium network. Its presence at more popular airports and its best-in-class route network helps capture higher levels of custom. The package holiday business has also been a brainchild well-worth pursuing.”

Mr Lundgren said: “easyJet's targeted growth and focus on productivity has delivered a reduction in winter losses, boosted by our trusted brand and network that we continue to invest in.

“Our two newest bases, Alicante and Birmingham, are achieving passenger numbers well above the network average and we have announced a tenth UK base at London Southend from next March, continuing the growth of our leisure network in the UK where easyJet holidays plays an increasingly important role.

“We are now absolutely focused on another record summer which is expected to deliver strong FY24 earnings growth and are on track to achieve our medium-term targets.”

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Sir Stephen Hester, chairman of easyJet, said: “We are sad that Johan will retire from easyJet. He has done an excellent job as our CEO since December 2017; steering the company through the immense challenges of the Covid period, and setting up a clear strategy and strong execution plan towards its ambition of "being Europe's most loved airline, winning for customers, shareholders and our people". There is good positive momentum and Johan will be with us to close out the current year which we hope will be another one of strong progress.

“We are also delighted to be able to announce Kenton as our next CEO, allowing an orderly and seamless transition. The appointment was made after a thorough process with a strong internal and external field of candidates. We are focused on executing the medium-term plan and related financial targets set out earlier this year and see Kenton as the ideal person to lead our executive team to that end. He has impressed since joining easyJet in 2021, is fully bought in to the plan and will hit the ground running."

Shares in easyJet closed down 5.99%, or 31.7p, at 497.7p.