easyJet still positive on outlook despite turbulence of Omicron

Near-term bookings at easyJet have softened with the emergence of Omicron, but the budget airline carrier still for the moment expects passenger numbers to return to near pre-pandemic levels by the end of the summer.

Speaking in a radio interview, chief executive Johan Lundgren said there had been “some weakening” in demand since the identification of the new strain from South Africa, which has led to the imposition of new travel rules in the UK. The impact so far has been less severe than with the introduction of previous travel restrictions, with many customers opting to re-book for next year rather than cancelling outright.

However, he added it was too early to predict what impact Omicron will have on the travel sector: “We need to see how things settle down.”

The airline reported a loss before tax of £1.1 billion for the year to September 30, higher than last year’s loss of £835 million but better than analysts had expected. Passenger numbers fell by nearly 58 per cent to 20.4 million in the same time period.

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Mr Lundgren emphasised that easyJet has prepared for periods of uncertainty along the road to recovery, having used last year’s extensive grounding of most of its fleet to restructure its cost base.

“These initiatives alongside our strong, investment grade, balance sheet provide easyJet with renewed strength to manage any further Covid related travel disruptions, as well as a platform to fast track our growth and deliver strong shareholder returns,” he said. “With this platform, we have the ambition to beat our targets set earlier this year.”

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said there are reasons for optimism but there’s also no getting away from the fact that the “coming months will be patchy at best”.

“Airlines can’t seem to catch a break,” she said. “News of new Covid variants, and the potential for further travel restrictions, makes it incredibly difficult to predict trading patterns from here.

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“Unsurprisingly, easyJet flew a significantly reduced number of passengers this year than it did in 2020, and just when it thought it was breaking out of the clouds, there’s further uncertainty to contend with.”

She added: “There are some competitive advantages where easyJet’s concerned. The biggest is that it’s a lower cost short-haul carrier, where demand should return at a faster rate than long haul. The group remains confident that capacity will be near pre-pandemic levels by next summer.”

The group has predicted it will be operating at 70% of pre-pandemic levels by the second quarter, and hopes to be near 2019 levels of capacity by the summer of next year. Many who have booked summer 2022 holidays have chosen sunshine destinations such as Greece, Turkey and Egypt.

Revenue booked for the six months from April to September of next year is ahead of that for the same period in 2019. The airline is also increasing its fleet by 25 aircraft, with slots added at Gatwick, Porto, Lisbon and Milan’s Linate.

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John Moore, senior investment manager at Brewin Dolphin, said easyJet looks to be in good position to navigate the turbulence ahead.

“Despite the likely impact of the Omicron variant – at least in the short term – easyJet appears to be optimistic about what lies ahead,” he said. “Having raised equity earlier in the year, the airline is sitting on ample liquidity to see it through oncoming headwinds, while it has also used the pandemic to make a meaningful difference to its cost base and operations.”

Former Royal Bank of Scotland chief executive Stephen Hester, who officially takes over today from outgoing easyJet chairman John Barton, said the board is “very conscious” that shareholders of all airlines have had a rough ride during the Covid pandemic.

“Over the last three months, I have engaged intensively with the board and management team as well as visited many parts of the business to move up the learning curve quickly,” he said. “Everything I have seen demonstrates this is a company that wants to succeed with a leadership team which has the ambition to do so.”

Shares in easyJet closed 6.1p lower to finish yesterday’s trading at 496.5p.

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