EasyJet shares rise as analysts forecast profit rise on falling fuel costs

EasyJet shares rose on Tuesday after a trader issued an upgrade on expectations the airline’s profits will benefit from lower fuel costs next year.

Peel Hunt increased EasyJet’s price target from 850p to 900p, reflecting forecasts that pre-tax profits will grow by 3-5 per cent in the 2025/26 financial year.

EasyJet’s overall pre-tax profits rose by more than a third to £610m in the 12 months to September 30, thanks to growing passenger demand and the popularity of its holiday packages.

A total of 89.7 million people traveled with the airline, an 8 percent year-on-year increase, as consumers prioritized vacation spending amid widespread cost-of-living pressures.

There was a 36 per cent increase in the number of customers booking with EasyJet Holidays, helping the package travel division’s turnover rise 47 per cent to around £1.1bn.

Increased passenger numbers also boosted the group’s accessories sales by 13 per cent to just under £2.5bn, with additional profit coming from carry-on luggage and leisure packages.

As a result, EasyJet’s total revenue rose 14 per cent to £9.3bn, while its net cash soared from £41m to £181m.

Having expanded its annual capacity to more than 100 million, the company expects to increase it to 103 million in fiscal 2025, supported by a 6 percent increase in average trip duration.

It also plans to reduce its winter losses, having reduced them by £40m last year through what it called a “combination of productivity and utilization benefits”.

Peel Hunt said on Tuesday that “strong leisure demand” for winter sun destinations such as Cape Verde and the Canary Islands and sustained interest in traditional winter locations for northern lights viewing and Christmas markets will reduce such losses.

EasyJet’s full-year results will be the last under the leadership of Johan Lundgren, who will step down in early 2025 after seven years in the role.

Lundgren’s tenure has been tumultuous, corresponding with the Covid-19 pandemic that virtually paralyzed global air travel and caused huge financial losses for airlines.

However, while EasyJet posted its first annual losses since its founding in 1995, the company has bounced back strongly, achieving consecutive record summer profits for the past two years.

Lundgren’s replacement is EasyJet’s current chief financial officer, Kenton Jarvis, who was previously aviation director at travel giant TUI Group.

Jarvis will be tasked with bringing EasyJet closer to its medium-term target of more than £1 billion in annual pre-tax profits.

EasyJet shares They rose 3.6 per cent to 566.4 pence on Tuesday afternoon, although they are still down to more than half their pre-pandemic levels.