easyJet share price slips back despite narrower full year loss

In October the easyJet share price hit ten-year lows and while we’ve seen a modest recovery since then, today's full year numbers have seen the airline post a full year pre-tax loss of £178m, its third successive annual loss.

Despite another annual loss the outlook does look slightly more encouraging, however the shares have slipped back a touch in early trade, as investors weigh up the airline’s prospects in a market where margins are likely to be become even more compressed as where it is competing with the likes of Jet2 and Ryanair, both of which have recently posted some very solid numbers.

On the plus side, today’s loss was much less than the £1.1bn we saw a year ago, however that’s like comparing apples with oranges given the huge disruption seen to aviation that was caused by the aftermath of the pandemic a year ago.

The numbers also included disruption costs of £78m incurred as a result of the problems encountered during Q4, and a £64m loss in respect of exchange rate effects due to the weakness of the pound.

Total revenue rose to £5.77bn, while costs increased to £5.95bn, a rise of 129% all of which is highly encouraging, however the airline seems to be struggling to meet its load capacity targets, which are slowly returning to pre-pandemic levels, but seem to be lagging behind its peers.

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, in order to deal with the disruption which took place during Q3.

For the whole of 2022 the airline saw the load factor return to 85.5%, up from 72.5% a year ago, but it is still below 2019 levels, when they were at 91.5%. It also has some way to go to match the levels being achieved by the likes of Ryanair, who I might add also returned a half year profit of €1.37bn when they released their numbers a few weeks ago, and which perhaps explain some of today’s early share price weakness.

Fuel costs for H1 are 74% hedged, up from 69% hedged a few weeks ago, and 51% hedged in H2, 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.

In an attempt to get ahead of any logistical problems easyJet has said it is taking steps to build resilience in order that the problems encountered in the summer of 2022 aren’t repeated in the summer of 2023.

easyJet holidays is also expected to add to the bottom line with a target of 30% growth for the coming year, after delivering revenue of £368m and a profit of £38m in 2022.

easyJet said in its Q4 update that they wouldn’t be recommending the payment of a dividend, and this was confirmed in today’s full year numbers