EasyJet targets £1bn profit as Lundgren signs off

EasyJet has set its course towards achieving regular profits of £1 billion as it recorded annual pre-tax earnings of £610 million, a 34 per cent increase in a year.
Johan Lundgren, signing off as the carrier’s chief executive after seven years which included the Covid pandemic and the need to save the airline through rescue refinancing, praised its success in relaunching the concept of the package holiday, with his creation easyJet Holidays accounting for more than 30 per cent of group profits.
“This strong performance reflects the effectiveness and execution of our strategy as well as continued popularity of our flights and holidays,” said Lundgren, 58, who hands over the controls to his finance director Kenton Jarvis at the turn of the year.
“It also represents a significant step towards our goal of sustainably generating over £1 billion annual profit before tax.”
He continued: “We have a record summer and we are outperforming every other airline. We and British Airways recovered more slowly [after the pandemic] but we are showing we have gained the most by transforming our network.”
A particularly strong summer catapulted easyJet to a full recovery from the lockdowns, groundings and travel restrictions of the pandemic.
In the three months to the end of September, the final trading quarter of easyJet’s financial year, the airline carried 5.7 per cent more passengers than in summer 2023, with its planes flying 0.6 of a percentage point fuller at 92.2 per cent, a key metric for profitability.
That brought in revenues for the quarter that were 14 per cent higher at £3.4 billion and profits of £724 million, wiping out the deficit recorded in the previous nine month including the traditionally loss-making winter season.
The airline carried 89 million passengers over the 12 months, still below pre-pandemic levels. It said it will fly 103 million seats in the year through to the end of September. Its previous, pre-pandemic record was 96 million passengers in a single financial year. It expects to grow easyJet Holidays by another 25 per cent.
Jarvis, 56, said his plan is to take advantage of its package holiday proposition. “The airline will continue to grow, particularly on popular longer leisure routes like Tunisia and Morocco, the Canaries and Cape Verde.”
Shareholders who have failed to see the stock price make much headway over the past two years will see a near trebling in the dividend to 12.1p a share from 4.5p, putting the stock on a yield of 2.2 per cent. Shares in easyJet rose 2 per cent, or 11p, to 554p.
Of his seven years running the company, Lundgren’s legacy is that he saw out his term intact and the launch of easyJet Holidays, which he admits had not been the original plan when he took over from predecessor Dame Carolyn McCall.
“I never thought we were going to go bust,” said Lundgren of the darkest days in the pandemic even when the UK was the slowest jurisdiction to relax travel restrictions. “In fact it was my primary focus, that even when we had £50 million going out of the business every week that this airline would not go bust on my watch.”
By making profits of more than £600 million, easyJet has made a large leap toward its target of annual earnings of £1 billion. It is now left to Kenton Jarvis, the finance director, chief executive-designate and outgoing boss Johan Lundgren’s wingman in recent times, to deliver the plan when he takes the controls at the turn of the year.
The plan is deceptively simple: reduce winter losses which have long been a burden; fly newer, bigger aircraft which means more passengers at a lower per-seat fuel burn and operating cost; and continue to leverage the success of easyJet holidays.
To solve the winter conundrum, the plan is to improve aircraft utilisation, switching services from heavier lossmaking routes to longer flights which give immediate productivity gains.
On aircraft, the plan is “upgauging” — retiring the last 80 or so of the smallest Airbus A319 traditional workhorses in easyJet’s 333-strong fleet and replacing them over time with A320s and Airbus’s largest narrow body planes, the A321.
And on holidays, Jarvis admits the success of easyJet’s embrace of the old-fashioned package holiday, means he is already considering an upward revision on the goal which has the segment under current plans bringing in £250 million of the targeted £1 billion group profits.
Analysts are pencilling in group profits of £690 million for the current financial year through to next September.
Jarvis is not guiding either way on those forecasts nor on when the £1 billion annual profit target will be hit other than to say that it is between 2026 and 2028 that the new Airbus planes will land with easyJet and “that is when the upgauging impact will come through fast.”