Jet2 faces a £25 million hike in annual employment costs as a result of changes announced in last month’s Budget.
The disclosure came as the UK’s largest tour operator and third largest airline reported that half-year pre-tax profits had surged by 20% to more than £790 million on the back of a record summer.
Carryings in the six months rose by 11% year on year to 13.34 million on seat capacity up 13% to 14.85 million with an average package holiday price up 6% to £904.
The group also projected that it was on track to deliver profits ahead of market expectations for the full financial year to March 2025 of more than £540 million, “assuming no material extraneous events”.
However, Jet2 said: “As ever, we continue to be mindful of the potential indirect impacts of ongoing geo-political challenges and the financial impact of the recent UK budget, in particular in the area of employment costs, which we estimate will increase our labour costs by approximately £25 million per year, plus any wider consumer implications.”
The Labour government’s first Budget since 2010 saw a hike in employers’ national insurance contributions as well as increases to the national living wage and national minimum wage.
Jet2 reported that capacity for summer 2025 was 9% up year-on-year with 18.74 million seats including new bases at Bournemouth and Luton airports.
“Bookings and pricing at this very early stage are in line with management expectations,” the group noted.
The interim results statement reported the group delivering “another record performance in terms of passenger numbers, revenues and profitability”.
Revenue for the period to September 30 rose by 15% to top £5 billion, with package holiday pricing “resilient”.
Flight-only ticket yield per passenger sector softened by 1% to £130.81, “although absolute gains from the strong late demand more than offset this slight price decrease”.
Jet2 added: “Given our seat capacity growth, the later passenger booking profile, the mix of passengers and total margin achieved, we were very pleased with this outcome.”
Ten new Airbus A321neo aircraft entered service in the half year.
“Investment continues in infrastructure and technology to improve our customer first product proposition and support our growth ambitions,” the company said.
Capacity on sale for winter 2024-25 is currently 14% higher than the same period last year at 5.11 million seats.
“The closer to departure, later booking profile experienced during summer 2024 has continued,” the company disclosed. “Average pricing to date is displaying a modest increase for our package holiday product, with flight-only slightly ahead.
“Recent improvements in the macro-economic environment including falling inflation should help ease some cost base pressures.
“In addition, we are approximately 70% hedged for summer 2025 for both foreign exchange (US dollar and euro) and jet fuel and 100% hedged for calendar year 2025 carbon emissions allowances, locking in a healthy proportion of cost certainty.”
Staff costs in the period increased by 17% to £443.4 million, which included a 5.5% pay award. Brand and direct marketing costs grew 9% to £136.5 million with bookings 10% higher “as the business invested to maximise average load factor and to optimise the forward bookings position for winter 2024-25 and summer 2025 respectively”.
Chief executive Steve Heapy said: “Even in difficult economic times, the annual overseas holiday remains a highly valued and eagerly anticipated experience, often taking precedence over other discretionary spend.
“As a result, we are confident that our proven business model – anchored to delivering a fantastic customer service with a well-established, trusted holiday brand – offers customers a compelling value proposition.
“With our extensive product range, appealing flight times and truly variable duration holidays, customers have plenty of choice and flexibility to be able to tailor their holiday plans to meet their individual budgets.”
- Julie Palmer, partner at Begbies Traynor, commenting on the interim results, said: “Jet2 continues to show impressive momentum, delivering another record performance in the first half of the year. With revenue up 15% and profit before tax rising by 20%, the results underline the resilience of the package holiday market and the strength of its customer-first approach.
“While many competitors have grappled with challenges, including Boeing delivery delays and falling airfares, Jet2 has managed to balance healthy seat capacity growth with strong demand, supported by investments in fleet modernisation and new regional bases at Luton and Bournemouth.
“The group’s confidence is evident in its decision to raise the interim dividend by 10%.
“However, challenges remain, including a sizeable £25m increase in annual labour costs following the autumn Budget. That said, Jet2’s disciplined cost management and hedging strategy should help to insulate the group and provide it with a strong foundation for growth in the months ahead.
“With a 14% increase in winter 2024-25 capacity and encouraging early bookings, Jet2 looks well-positioned to maintain its momentum during the quieter trading period over the winter months and, as the festive season approaches, the company’s value proposition is likely to resonate with those seeking a winter escape, ensuring the group heads into 2025 with confidence.”