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EasyJet reassured investors that demand for travel was strong as it reported rising profits and forecast that airfares would hold steady during the key summer months.
The low-cost carrier on Wednesday reported a 16 per cent rise in pre-tax profits to £236mn in its third quarter, and offered a “positive outlook” for the rest of the year, without giving detailed financial guidance.
The update came after rival Ryanair earlier this week reported a sharp drop in profits and said airfares were falling, triggering questions over the sustainability of a travel boom that had powered airlines to record profits.
While airline bosses report that people are still keen to travel, investors have been spooked by growing signs that passengers are no longer willing to stomach further rises in airfares, following two years of price increases due to a shortage of aircraft and rising airline costs.
Airlines including Lufthansa, Delta and Air Canada have all warned on fares in recent weeks, and the US market in particular is grappling with an oversupply of seats.
EasyJet moved to reassure shareholders on Wednesday that fares were holding up, reporting that yields for its peak travel season — a key industry measure of average ticket prices that takes passenger numbers and distance flown into account — were broadly flat year on year.
Passenger revenue per seat, a proxy for ticket prices, fell 1 per cent to £56.95 in the three months to the end of June, its fiscal third quarter. However, total revenue per seat — which includes optional extras including cabin bags, luggage or choosing a seat — grew 1 per cent to £81.61.
EasyJet forecast that prices would “continue the trend” into the key summer months, when airlines book a significant portion of their profits. Shares in the company rose 6 per cent in morning trading on Wednesday.
“We remain on track to deliver another record-breaking summer, taking us a step closer to our medium-term targets,” said chief executive Johan Lundgren.
Analysts at Barclays said the update was “reassuring”, and offered a “very different tone” to Ryanair’s disappointing results. “We think easyJet benefits from its more upmarket customer demographic, more modest capacity growth, the support to the business from the growing holidays business and from helpful network developments,” they said.
EasyJet reported a particularly strong performance from its package holiday business, which had been built up by Lundgren, who is leaving the company next year.
Revenue from the holiday arm grew 42 per cent year on year to £336mn, outpacing the 8 per cent growth in airline revenue, which rose 8 per cent to £2.3bn.
Separately on Thursday, Heathrow airport reported that a record 39.8mn passengers passed through the hub in the first six months of the year, up 7 per cent on 2023. The airport said pre-tax profits rose 15.8 per cent to £323mn.
Chief executive Thomas Woldbye said the UK’s largest airport had been boosted by a recovery in business travel, including “Asia coming back online” following years of low passenger numbers post-pandemic.
Woldbye said he was “encouraged” by the new Labour government’s signals that it could support a third runway at the airport, but cautioned that the company was still working on its long-term expansion plan, which was paused in 2020 when the pandemic struck.