EasyJet is to acquire more than 150 new aircraft as part of a $20 billion fleet renewal plan as it projected a record summer profit of up to £670 million.
The budget airline’s tour operating arm easyJet holidays is expected to outperform forecasts and contribute a pre-tax profit of around £120 million for the financial year.
Overall profits for the 12 months to September 30 are forecast to reach between £440 million-£460 million against a loss of £178 million in post-pandemic 2021-22.
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The package holiday business is now expected to deliver an annual profit of up to £250 million as the airline set £1 billion as a new medium-term financial profits target.
In a trading update, the carrier reported 8% annual passenger growth to 26.2 million in the July-September peak summer flying season delivering a quarterly pre-tax profit of between £650 million-£670 million.
Capacity is up by 15% year-on-year in the current quarter.
EasyJet confirmed firm orders for 157 new Airbus aircraft for delivery between 2029 and 2034 and purchase rights for a further 100.
This increases the airline’s order book up to 315 aircraft. The new aircraft will deliver lower fuel burn, CO2 emissions and operating costs per seat, according to the carrier.
The airline said: “Based on latest list prices for aircraft published in January 2018, the proposed purchase and the conversion are expected to result in an aggregate commitment of approximately $19.9 billion, which will be spread over a number of years.”
Chief executive Johan Lundgren said: “We have delivered a record summer with strong demand for EasyJet’s flights and holidays with customers choosing us for our network, value and service.
“This performance has demonstrated that our strategy is achieving results and so today we have set out an ambitious roadmap to serve more customers and deliver attractive shareholder returns, underpinned by a continued focus on costs and operational excellence.
“Our new medium-term targets provide the building blocks to deliver a PBT [profit before tax] greater than £1 billion. This will be driven by reducing winter losses, upgauging our fleet and growing easyJet holidays.
“As part of our commitment to shareholder returns, the board intends to reinstate dividends commencing with the FY23 results.
“We have also reached a proposed agreement with Airbus for an additional 157 aircraft order and a further 100 purchase rights.
“This will enable EasyJet’s fleet modernisation and growth to continue beyond 2028 while providing substantial benefits including cost efficiencies and sustainability improvements.”
The airline said: “Demand for EasyJet’s primary airport network has remained strong, delivering a record financial performance for the group this summer.
“Moving into the 2024 financial year, booking momentum is continuing and we expect Q1 capacity to grow by 15%.
“Ticket yields are ahead year-on-year with load factors broadly in line. Our continued focus on cost alongside productivity and utilisation gains are expected to result in the airline cost per seat excluding fuel slightly reducing year on year in the December quarter.
“Moving forward, EasyJet has today updated its capital allocation framework to underpin the business’s focus on serving customers well whilst delivering attractive shareholder returns. Executing the four pillars of our strategy involves: building Europe’s best network, transforming revenue, delivering ease and reliability and driving our low-cost model alongside capital discipline and disciplined growth. This, supported by easyJet’s strong balance sheet, provides the platform to deliver long term shareholder value with sustainable returns.”
Commenting on the trading update, Ruth Griffin, leisure partner at international law firm Gowling WLG, said: “The introduction of new cost control measures as well as additional routes by CEO Johan Lundgren seems to be paying off with EasyJet flying high currently as the airline continues to strengthen its margins and enhance its resilience to international affairs.
“The ongoing conflict in Ukraine is still causing issues with some flight routes and the possibility of further air traffic control strikes in Europe on the horizon gives shareholders a reason to be tempered despite the positive performance.
“The company’s approach to achieving net zero will help to support its growth, having recently become the first airline to sign a contract with Airbus for its carbon-removal initiative known as the Airbus carbon capture offer, and demand for travel remaining strong.
“However, this demand creates a more competitive space and EasyJet will need to continue offering affordable pricing in the face of high living costs and to capitalise on the millions enjoying the return of restriction free travel following the pandemic.”
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