Jet2 warning causes turbulence for UK airline sector
A sector favourite has been brought down to earth by an update on summer booking trends. City writer Graeme Evans also explains the impact on easyJet, IAG and others.
19th February 2025 13:23
by Graeme Evans from interactive investor
The poor start to the year for easyJet (LSE:EZJ) shares continued today after its AIM-listed rival Jet2 Ordinary Shares (LSE:JET2) said later booking trends and cost headwinds had dented this summer’s margin outlook.
Airline and package holidays operator Jet2 lost a tenth of its value, while easyJet returned below the 500p threshold as it extended losses since mid-December to more than 15%.
- Invest with ii: Top UK Shares | Share Tips & Ideas | Cashback Offers
British Airways owner International Consolidated Airlines Group SA (LSE:IAG) also fell today but the resurgent FTSE 100 heavyweight stock is still 13% higher over the same period as easyJet.
The Luton-based carrier’s weak run included a negative reaction to last month’s trading update, when it forecast a small decline in second-quarter revenues per available seat kilometres.
This was due to easyJet’s need to stimulate demand in its quietest quarter, particularly in light of capacity growth on its longer leisure routes and the timing of Easter from March to April.
- Why easyJet share price discount is unjustified
- 10 shares to give you a £10,000 annual income in 2025
The airline reported robust demand for flights over the Easter period and said that summer bookings continued to build as newer destinations such as Tunisia and Cairo are proving popular.
The FTSE 100 group reiterated its medium-term targets, boosted by the growth prospects of its holidays division as the operation saw a 40% increase in profitability in the most recent quarter.
Jet2 issues warning
One of the biggest factors depressing easyJet’s shares and those of some other European airline and holiday operators has been the cost outlook.
The worries were fuelled today when Jet2 highlighted inflation-busting trends in hotel accommodation, aircraft maintenance and general airport and Eurocontrol charges.
Mitigating some of these headwinds, Jet2 said it was 85% hedged for both foreign exchange and jet fuel this summer and 100% hedged for its 2025 carbon emissions allowance.
It is also facing £25 million of full-year incremental costs due to the National Living Wage, which ripples through to several pay levels, and changes to both the Employer National Insurance threshold and headline rate.
The government’s move to decarbonise aviation by mandating the supply of sustainable fuels to 2% of the mix in 2025 and 10% in 2030 has resulted in over £20 million of incremental costs.
The pressures come at a time when the squeeze on consumer discretionary income is causing households to make later decisions on their holiday plans.
This trend was highlighted by Jet2 today as it said forward bookings for the combined departure months of April, May and June were up 7% but with the average load factor of its planes broadly unchanged on a year earlier.
- Sector Screener: a stock with more than just defensive appeal
- ii view: Wizz Air optimistic about passenger numbers
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
Its sale capacity for the summer is 8.5% higher at 18.6 million seats, with new bases at Bournemouth and Luton airports contributing about 4% of this growth at over 700,000 seats.
Jet2 added in its statement: “Pricing remains keen with our package holiday product displaying a modest average increase and flight‐only slightly positive.”
Chief executive Steve Heapy added that the current trends may mean that profit margins in the year ahead “come under some pressure”. Profits for the financial year to next month are set to rise by between 8% and 10% to a range of £560 million and £570 million.
Jet2 shares rose 27% in 2024 but are 10% lower so far in 2025 after today’s reversal to 1388p. The company, whose £3 billion market capitalisation is large enough for a top 15 place in the FTSE 250, traded as high as 1,649p in mid-December.
Other stocks under pressure today included On The Beach Group (LSE:OTB), which dropped 12.5p to 239.5p, and Wizz Air Holdings (LSE:WIZZ) after a decline of 67p to 1,558p.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
AIM stocks tend to be volatile high-risk/high-reward investments and are intended for people with an appropriate degree of equity trading knowledge and experience.