Low-cost airline and tour operator Jet2 has swung back to profit despite spending more than £50mn to compensate customers for summer travel disruption in UK airports.
The travel group posted pre-tax profits of £505mn in the six months to September 30, swinging back from a £195.1mn loss a year earlier when Covid-19 restrictions were affecting the industry. Profits were 44 per cent higher than for the same period in 2019.
Philip Meeson, Jet2 chair, said winter bookings were “encouraging” but warned that the group’s margins “may come under pressure” from a jump in input costs associated with “fuel, carbon, a strengthened US dollar and wage increases”.
The strong trading performance came despite “a difficult return to normal operations” and the company having to absorb “substantial associated disruption costs”, Meeson said.
Jet2 avoided flight cancellations during the most severe disruption to UK airports in July and August, but paid out more than £50mn in delay, compensation and customer reimbursement costs, which were “materially higher” than in summer 2019, the company said.
The air travel industry was blighted by a wave of delays and flight cancellations over summer, in large part because of staffing shortages among airline staff, ground handlers and air traffic controllers.
The budget operator said its in-flight sales were hit by supply chain problems. The average price for package holidays increased by 5 per cent to £782 to offset inflationary cost pressure, the company added.
Jet2, which operates out of 10 airports across the UK, said it was “retaining increasing numbers of colleagues through the winter months to ensure maximum operational resilience ahead of next summer”. It is on track to beat analyst expectations for full-year profits of £283mn, the company added.
“While the market is concentrated on risks to summer 2023 profitability we consider the near term profit beat today to be encouraging, which appears to be driven by the higher package mix, and should be taken well,” said analysts from Barclays in a note.
Shares in the Aim-listed company were up 5.6 per cent to £9.42 in early morning trading in London.