easyJet jumps on Q3 trading update as passenger growth and holidays business boom

Investing.com –  easyJet's (LON:EZJ) strong Q3 trading update sent shares soaring on Wednesday after it reported a surge in passenger numbers and a booming holidays business.

Profits soar on passenger growth:

easyJet's profitability saw a healthy 16% year-over-year increase in Q3, reaching £236 million in profit before tax (PBT). This translates to a £33 million improvement compared to the same period last year. 

This positive performance is largely attributed to an increase in passenger numbers, which climbed by 8% year-on-year. This growth highlights the continued appeal of easyJet's network of destinations and its value proposition for travelers.

Revenue takes flight with multiple factors:

Overall revenue for easyJet increased by 11% to £2,631 million in Q3. This growth can be attributed to the rise in passenger numbers, which led to higher revenue from ticket sales. Additionally, easyJet saw growth in ancillary revenue per seat, which includes additional charges for services like checked baggage or seat selection. Lastly, the strong performance of the holidays segment played a significant role in boosting overall revenue.

The holidays segment emerged as a bright spot for easyJet  in Q3. Profit before tax (PBT) for the holidays business soared by 49% to £73 million, fueled by a 33% increase in passenger numbers.

Costs remain grounded despite sector length increase:

While overall costs did increase slightly in Q3, easyJet  managed to keep a tight lid on expenses. Headline cost per seat excluding fuel saw a meager 1% rise. This increase can be attributed to a shift in flight patterns, with easyJet  offering a higher proportion of longer leisure routes in Q3. 

The associated increase in average sector length slightly offset the positive impact of significantly reduced disruption costs compared to the previous year.

Positive outlook for FY24 and beyond:

The company projects a capacity of around 100 million seats, indicating continued confidence in passenger demand. Additionally, easyJet  holidays is expected to maintain its momentum, with a projected PBT exceeding £180 million, representing over 48% year-on-year growth. 

Bookings for Q4 are also encouraging, with 69% already sold (up 1% year-on-year) despite a 7% increase in capacity. This translates to a significant increase of 1.5 million seats sold for peak summer compared to last year.

However, analysts at RBC Capital Markets noted that other European airlines might offer more attractive valuations when considering metrics like group ROCE (Return on Capital Employed), ROIC (Return on Invested Capital), and EPS (Earnings Per Share) Compound Annual Growth Rate (CAGR) prospects.