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Europe

EasyJet Raises Profit Outlook After ‘Record’ Summer, Orders More Airbus Planes

Edward Russell
October 12th, 2023 at 5:04 PM EDT

EasyJet expects operating profits nearly double analyst forecasts during the year that ended in September, after a banner summer travel season in Europe. That, in part, gave the European discounter confidence in ordering nearly another 150 Airbus A320neo-family aircraft.

UK-based EasyJet forecasts a £460-480 million ($560-584 million) pre-tax profit in its 2023 fiscal year that ended in September, the airline said Thursday. That’s better than analysts’ previous estimates. Revenue is forecast at roughly £8.2 billion, including £780 million from its booming EasyJet Holidays business.

EasyJet posted a £3 million operating profit in its last fiscal year, which ended in September 2022.

“We have delivered a record summer with strong demand for EasyJet’s flights and holidays,” CEO Johan Lundgren said Thursday.

The airline expects a £655-675 million operating profit in the quarter that ended in September. Unit revenues increased an estimated 8.5% year-over-year, and unit costs excluding fuel decreased by roughly 1%. EasyJet flew 9% more seats between July and September than it did last year.

Alongside the rosy profit forecast, EasyJet unveiled plans to order another 147 Airbus A320neo family aircraft for delivery from 2029-34. The deal, which includes 56 A320neos and 101 A321neos plus 100 new purchase rights, would allow it to fully retire its fleet of Airbus A319s as well as half of its A320ceos. Shareholders must approve the deal that is worth an estimated $19.9 billion at list prices.

The order is just the latest in a string of large aircraft deals from airlines. Earlier in October, United Airlines ordered another 110 A321neos and Boeing 787s. And Air Canada, Air France-KLM, and Cathay Pacific have all added new commitments to their orderbooks in recent weeks.

The deals come amid numerous aviation supply chain issues that are limiting industry growth. Needed inspections of geared turbofan engines made by Pratt & Whitney will temporarily ground up to 600-650 older A320neo-family planes next year. And Airbus and Boeing, despite attempts, cannot meet their aircraft delivery schedule commitments. Even maintenance of older planes, like Boeing 757s at Delta, is being held up due to a shortage of spare parts.

These issues limit what the big planemakers can produce today, and throw future production rate increases into question. EasyJet cited this in its rationale for the deal, saying: “Delivery slots for narrowbody aircraft … are very limited until at least 2029 from both Airbus and Boeing. EasyJet anticipates that this limitation will extend into 2030 and beyond.”

In addition, as part of EasyJet’s deal, it converted 30 existing orders for the A320neo to the larger A321neo, which seats 235 passengers. That additional seating capacity will allow the airline to continue to grow at its core primary airports, including Amsterdam Schiphol where the Dutch government is moving forward with plans to cut flights over the next few years.

The discounter has been the subject of consolidation chatter in Europe. In 2021, EasyJet reportedly rejected an unsolicited takeover offer from competitor Wizz Air and instead raised capital to fund growth outside of its core markets in northern and western Europe. That strategy included an order for 56 A320neos in 2022, plus the acquisition of new slots in key southern European airports including Lisbon.

However, despite the capital raising and aircraft orders, many continue to see EasyJet as a likely takeover target. Potential suitors include International Airlines Group, which owns British Airways and IAG. To date in the latest round of European airline consolidation, Italy’s ITA Airways, Norway’s Wideroe, and Scandinavia’s SAS have announced deals with, respectively, the Lufthansa Group, Norwegian Air, and Air France-KLM. And the government of Portugal launched the sale of a 51% stake in the airline in September.

“I don’t think that there is [a] genuine road map for any consolidations in mind [at] the low-cost airlines,” Lundgren said Thursday.

Looking ahead to the October-to-December quarter, EasyJet plans to grow capacity roughly 15% year-over-year. Yields are forecast “ahead” of where they stood during the same period in 2022.

The airline anticipates capacity growth to continue at roughly a 5% annual increase through 2028.

Edward Russell
October 12th, 2023 at 5:04 PM EDT

Tags: Europe

Photo credit:  Flickr / Eric Salard/airlines470

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