Hargreaves Lansdown view12 Apr 2022 18:51
Our View
easyJet's enjoying the spoils that come with the world getting back to normal. Easing restrictions means terminals are filling up once more, and the short-haul specialist is due to be back to pre-pandemic capacity by the summer.
It's certainly not been a smooth couple of years, and recovery isn't happening in a straight line.
Proceeds from the £1.2bn rights issue helped the group stomach disruptions, but it also gave easyJet the ability to increase its presence at major airports, investing in easyJet holidays and growing its ancillary product (things like extra baggage allowance, leg-room seats and food) portfolio.
This is a continuation of the existing strategy - focusing on profitable Western European routes within major airports. It's an approach that sets easyJet apart from other low-cost carriers - who trim costs by flying in and out of smaller, less convenient airports. And these efforts are paying dividends, with big boosts to ancillary revenue supporting the top line at the half year mark.
Operating in the middle of the market - between premium flag carriers and deep budget rivals can be a difficult place to be. However, so far easyJet seem to be navigating the industry's considerable headwinds rather well.
A focus on short-haul travel puts easyJet in a better position than its long-haul rivals when it comes to capturing returning passengers. UK beach and leisure routes look set to benefit from pent up travel demand in the aftermath of Omicron, and that shows. Passenger numbers are now over the 11m, compared to around 1m this time last year.
Cost savings have been significant too and following the right's issue, net debt is at a level we're comfortable with. While we suspect debt reduction is still pretty high up management's to do list - and as a result dividend payments are not a priority - it looks like the group should be able to hold its own going forwards. We don't see the group needing extra funding from shareholders anytime soon.
It's far too early to say that the hard times are over for easyJet, with the pandemic still lingering and inflation looking persistent. So far, easyJet has made the best of a very difficult situation - weathering perhaps the biggest crisis to have ever hit the airline industry. But we've seen first-hand how quick the tables can turn for airlines, so we're not getting too excited just yet
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