EasyJet (EZJ Stock) share price takes off as airline boost profit outlook

Since falling to 10-year lows back in October, the easyJet share price has gone on a strong run higher in anticipation that 2023 will finally draw a line under three years of annual losses.

The direction of travel is positive, with the shares already up over 40% year to date, but they are still well below the peaks we saw last year above 700p a share, and pre-pandemic when they were well over 1,200p, which means they have plenty of scope to soar further.

Last year the airline posted a full year pre-tax loss of £178m, while saying that the outlook for 2023 was much more encouraging, and today’s trading update appears to support that assertion, with the airline raising its profit outlook.

Since the end of last year, the shares have soared in anticipation that the airline, as well as the wider aviation sector will be able to finally throw off the shackles of covid, the soaring cost of living, and the fallout of the Russian invasion of Ukraine.

Last year the sector also had to deal with the challenges of capacity constraints at major airports as well as staff shortages, which resulted in huge delays and cancellations. During Q4 easyJet said it managed to achieve load capacity levels of 92%, however these were achieved by reducing capacity during the quarter, due to flight caps at Gatwick Airport and Amsterdam.

Passengers will be hoping that these problems are behind them with easyJet saying at the end of last year that they would be taking steps to build resilience in order that the problems encountered in the summer of 2022 aren’t repeated in the summer of 2023.

Today’s Q1 trading update appears to be heading in the right direction even as the airline reports a £133m loss before tax, however today’s numbers are less about this quarter than they are about the next two.

Passenger numbers in Q1 rose to 17.48m from the 11.89m a year ago, with revenue per seat rising 36% year on year. The load factor for Q1 was 87%, a 10% rise from a year ago, but still below the levels pre-pandemic when it was running at 91.5%.

Optimism is high that easyJet holidays will be able to add strongly to the bottom line and the early signs are encouraging with the business adding a £13m profit during Q1. Guidance here was raised from 30% growth to circa 50% year on year, with bookings for it and the airline delivering record revenue days during January.

Nonetheless for H1, easyJet says it still expects to book a loss, albeit it should be significantly lower than the same period a year ago.

Guidance was kept unchanged for H1 seats with the airline saying it expects to fly around 38m seats in H1 of 2023, a 25% increase year on year, and 56m seats in H2, a 9% increase year on year.

All in all, today’s numbers point to a much-improved outlook than was the case a year ago and easyJet holidays seems to be gaining strong traction, as optimism grows that a strong H2 will be able to drag the airline back into profit after three years of losses.

This would be very welcome given that it continues to lag Ryanair which appears to be leaving it in its vapour trails when it comes to profitability.