RE: Chart says this is moving to 490/8/ in the coming weeks23 Aug 2024 08:46
AsyJet
A low-cost airline operating more than 1,000 routes across Europe, easyJet’s one of the biggest airlines in the world. The sheer size of its operations creates efficiencies, helping keep costs low.
It’s focus on popular routes in major airports, sets it apart from other low-cost carriers who trim costs by using smaller, less convenient airports.
The group’s third-quarter numbers landed a little better than markets expected. Revenue rose 11% to £2.6bn, mainly because passenger numbers were up 8% to 23.5mn.
Revenue per passenger is still moving in the right direction, partly thanks to in-flight extras. So-called ‘ancillary revenues’ are things like hold baggage, extra legroom, and food. This is a very profitable area, and growth has been impressive. Alongside broadly flat fuel costs, third quarter underlying pre-tax profits increased 16% to £236mn.
We think there’s good demand right now. On the supply side, the pandemic stunted capacity growth and it could be years before it’s back up again. With little sign of slowing demand, prices are likely to hold firm in the medium term.
But there are some issues to be aware of.
Fuel costs are a big part of running an airline, and are largely outside of the group’s control. If there were any supply shocks that sent oil prices higher, easyJet’s profitability would likely suffer. The sector could also be sensitive to further escalations in geopolitical tensions.
The balance sheet’s in much better shape than a few years ago, supporting the reinstatement of dividends. Right now, there’s a respectable forward dividend yield of 3.4% but as always, no dividends are guaranteed.
easyJet’s valuation is well below the long-run average, which we feel doesn’t reflect its market position or growth opportunities. The long-term picture looks positive to us, but there are no guarantees. There are some risks to watch out for, especially in the short term, so ups and downs are inevitable.
An independent Non-Executive director of Hargreaves Lansdown plc is also an Independent Non-Executive Director of easyJet plc.
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