Jet2 insists insists it has “the right product for these tougher times” amid inflationary pressures coupled with an uncertain UK economic outlook.
Prices are likely to come under some pressure in the medium term, the UK’s second largest travel group conceded.
The company admitted it had been been directly impacted by the broader disruption seen across the aviation sector and its supply chains.
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But Jet2 said: “Many suppliers have been woefully ill-prepared and poorly resourced for the volume of customers they could reasonably expect, inexcusable, bearing in mind our flights have been on sale for many months and our load factors are quite normal.
“Consequently, group performance for the financial year ending 31 March 2023 very much depends on how quickly the broader aviation sector returns to some level of stability, as well as strength of bookings for the remainder of summer and the second half of the financial year, a period for which we still have limited visibility.”
The group trimmed annual operating losses by 4% to £323.9 million for the 12 months to March 31.
The result came as capacity was ramped up to 7 million from just 2 million in the previous 12 months as the pandemic forced multiple travel restrictions.
The group’s overall liquidity “improved significantly” with total cash balances of £2.2 billion at the end of March, an increase of 62% year-on-year.
However, Jet2 said: “Fragile consumer confidence arising from the three-weekly UK government ‘traffic light’ reviews during summer ’21, meant customer bookings were significantly closer to departure than normal, leading to a reduction in average flight-only ticket yield per passenger sector of 29% year-on-year.”
The company reported a “satisfactory start” to its new financial year, with capacity for summer 2022 14% higher than pre-pandemic summer 2019.
“Overall demand for our leisure travel products has continued to strengthen, but with customers booking a little later than normal,” chairman Philip Meeson said.
More than 35% of this summer’s bookings are from new customers to Jet2.
Package holiday bookings remain a “materially higher mix” of the total, up 13 percentage points.
Average load factors for the summer are only 1.4 percentage points behind 2019 at the same point while pricing “remains robust”.
Meeson said: “Inflationary pressures coupled with the uncertain UK economic outlook for consumers, lead us to conclude that in the medium term prices are likely to come under some pressure. However, we believe we have the right product for these tougher times.
“The end-to-end package holiday is a higher yielding, resilient and popular product in difficult economic times and the Mediterranean and Canary Islands are evergreen destinations where people absolutely want to go
“The control of our own seat supply and our frequency of flying, allow us to offer truly variable duration holidays, critical in allowing our customers the ability to flex their holiday arrangements to suit their individual budgets.”
The company is fully hedged for jet fuel for this summer and 75% hedged for winter 2022-23 in line with its normal policy.
“However, although we invested well ahead of the summer season to ensure we had adequate resources to be able to operate efficiently and we also self‐handle at many of our key airport bases, we have been directly impacted by the broader disruption seen across the aviation sector and its supply chains,” Meeson added.
“As stated previously, inexcusably, many suppliers simply did not plan, prepare or invest for a normal summer season and are now suffering from the difficult employment market which has meant us incurring additional costs to recover the consequent disruption to our flying programme.
“Consequently, group performance for the financial year ending 31 March 2023 very much depends on how quickly the broader aviation sector returns to some level of stability, as well as strength of bookings for the remainder of Summer and the second half of the financial year, a period for which we still have limited visibility.
“Despite the looming economic difficulties, for the long term we continue to believe that opportunities for us to grow share as a financially strong and trusted package holiday provider will only increase.”
And he said: “Back in April 2020 it was hard to imagine a scenario where the leisure travel industry would suffer such a prolonged period of extraordinary financial and operational challenges. However, the Covid-19 pandemic and its far-reaching consequences have tested us all.
“We firmly believe the way in which our company responded to the pandemic will be remembered by our customers, and we are very proud of the way in which we looked after our customers in refunding over £1.7 billion of their advance deposits in a timely and accurate manner.”
- Julie Palmer, partner at business recovery firm Begbies Traynor, commenting on the results, said: “2022 was meant to be a bumper year for the travel sector but this morning’s results from Jet2 have laid bare the cocktail of issues hammering the industry.
“Savvy consumers pre-booking holidays meant many planes were already full, leaving little slack in the system. But widespread staff shortages are causing awful airport delays, meaning late bookings are down as would-be holidaymakers hold off on last-minute breaks for fear of being caught up in the chaos.
“Throw in rampant inflation, which is holding down consumer confidence, and the summer’s not looking so bright for travel companies.
“Like many operators, Jet2 hedged the majority of its fuel for 2022 but fuel prices look set to remain high and the company has already warned that rising fuel and staffing costs will result in price increases in summer 2023.
“So the appeal of a getaway later this year might start to wane as frugal travellers choose to focus their spending on staycations or saving for Christmas.
“That being said, Brits love holidays and, despite the disruption and staffing shortages, Jet2 is yet to cancel a flight due to labour shortages and has been transparent on price increases in 2023, so the low-cost airline could become the carrier of choice for people still desperate to getaway.”
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