EasyJet-6
Not particularly “dismal”. The last normal winter before Covid they had a winter loss of £272 million. Certainly lots of room for improvement going forward but then again easyJet’s net debt position is far better than it’s competitors (and improving). Headline figures don’t always paint the full picture.
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Very few airlines make any money in the winter. The markets seem OK with it which is what is important. They paid back a £500m bond in the period and net debt is almost nil now.
Good foundations moving forward now into more profitable months.
Good foundations moving forward now into more profitable months.
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The markets seem OK with it which is what is important.
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I think it's more a case of come back Cath Lynn, who was the Group Commercial Director. It's progressively lost its way in the five years since she went.
Different financial year ends, but taking the half-year reports for easyJet, they made roughly £350m last summer and lost £411m this winter so annualised loss to 31/3/23 of £61m with 328 aircraft - loss of about £200k per aircraft.
Ryanair forecasting profit of E1.325bn to 31/3/23 so £1.15bn with 523 aircraft = £2.2m profit per aircraft.
Jet2 guiding towards a profit of about £390m to 31/3/23 with 106 aircraft = £3.7m profit per aircraft.
A P&L improvement of £2.5m per aircraft for easyJet to pull them into the same ballpark doesn't sound like much of a stretch, but the problem is that if you're working on about £18m revenue per aircraft, that's quite a big shift when you've also got to achieve that with all 328 aircraft in the fleet.
Different financial year ends, but taking the half-year reports for easyJet, they made roughly £350m last summer and lost £411m this winter so annualised loss to 31/3/23 of £61m with 328 aircraft - loss of about £200k per aircraft.
Ryanair forecasting profit of E1.325bn to 31/3/23 so £1.15bn with 523 aircraft = £2.2m profit per aircraft.
Jet2 guiding towards a profit of about £390m to 31/3/23 with 106 aircraft = £3.7m profit per aircraft.
A P&L improvement of £2.5m per aircraft for easyJet to pull them into the same ballpark doesn't sound like much of a stretch, but the problem is that if you're working on about £18m revenue per aircraft, that's quite a big shift when you've also got to achieve that with all 328 aircraft in the fleet.
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I suspect that part of the issue is the collapse in business travel which was a substantial part of their income. They made a big deal about their hubs in major airports.
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Go back 10 years, 5 even, the airline mix in the UK was quite different. You had Ryanair and EasyJet as your key low-cost players, Thomson/TUI and Thomas Cook as the mainstream package holiday providers and the likes of Jet2 and Monarch as smaller, more hybrid outfits.
Now that position has fundamentally changed. Ryanair is the single key low-cost carrier, Jet2 and TUI are the main leisure/package holiday providers (but I think it's fair to say one seems in a much stronger overall position than the other) and now EasyJet is the one in more of the hybrid position.
The main question for me as an investor now would be what is it EasyJet are trying to be? It's clear they can longer compete on cost with the so-called 'ultra LCCs', so is it now all about EasyJet Holidays, or will they re-focus more on business travel as that re-bounds? They still have quite a stronghold on UK domestic and some good slot positions in major European hubs, but that alone is not going to be sufficient to drive longer-term strategic growth.
The problem I see with them attempting a more hybrid model is they won't be able to compete on specifically tailored products or the right kind of route network/schedule with the more specialised providers. History tells you those trying to attempt too much scope, or lack focus on the market they're trying to serve, often doesn't end well. I'm not saying EZY is at the end of the road, far from it, but they will need to find what it is they are trying to be I think if they are to continue as a leading, independent airline.
Now that position has fundamentally changed. Ryanair is the single key low-cost carrier, Jet2 and TUI are the main leisure/package holiday providers (but I think it's fair to say one seems in a much stronger overall position than the other) and now EasyJet is the one in more of the hybrid position.
The main question for me as an investor now would be what is it EasyJet are trying to be? It's clear they can longer compete on cost with the so-called 'ultra LCCs', so is it now all about EasyJet Holidays, or will they re-focus more on business travel as that re-bounds? They still have quite a stronghold on UK domestic and some good slot positions in major European hubs, but that alone is not going to be sufficient to drive longer-term strategic growth.
The problem I see with them attempting a more hybrid model is they won't be able to compete on specifically tailored products or the right kind of route network/schedule with the more specialised providers. History tells you those trying to attempt too much scope, or lack focus on the market they're trying to serve, often doesn't end well. I'm not saying EZY is at the end of the road, far from it, but they will need to find what it is they are trying to be I think if they are to continue as a leading, independent airline.
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Interesting how much focus their appears to be in these accounts on the success of easyJet holidays - 80% sold for the summer and a forecast £80m profit and expanding it to Switzerland.
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That's what the board gets appointing an ex TUI guy, but he couldn't get Air Berlin right so that has cost Easyjet dearly. Can't fight LH in their own back yard, even RYR know that.
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Ryanair have an interesting slide in their accounts released today. It compares their costs with competitors and EasyJet are massively behind.
For example, Ryanair pay an average airport fee of €7 per pax whereas easyJet pay €28.
Ryanair also suggest easyJet pay double in terms of aircraft ownership and maintenance and staff costs in € per pax.
They both have similar revenues per passengers.
Interesting challenges for easyJet in how to address that?
For example, Ryanair pay an average airport fee of €7 per pax whereas easyJet pay €28.
Ryanair also suggest easyJet pay double in terms of aircraft ownership and maintenance and staff costs in € per pax.
They both have similar revenues per passengers.
Interesting challenges for easyJet in how to address that?
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Interesting discussion about easyJet. Given that they operate a high proportion of their routes to/from major airport hubs like LGW/CDG/ORY/AMS it's little wonder their average cost is so much higher.
Given an inferior cost positioning to Ryanair, I'd guess the strategy will be to focus on hub airports where they can mop up slots and keep Ryanair out. LIS is an example, easyJet got awarded a nice batch of slots and the limiting factor of slot availability protects easyJet from Ryanair to a large extent. The mentioned airports above all as places looks GVA where FR do not fly give them a degree of insulation. The UK where I would suggest people prefer easyJet to Ryanair, they likely can compete at airports like MAN/LPL/EDI etc. Business travel will continue to recover. That will help. But I believe it's only a matter of time until Wizz and easyJet tie the knot.
Given an inferior cost positioning to Ryanair, I'd guess the strategy will be to focus on hub airports where they can mop up slots and keep Ryanair out. LIS is an example, easyJet got awarded a nice batch of slots and the limiting factor of slot availability protects easyJet from Ryanair to a large extent. The mentioned airports above all as places looks GVA where FR do not fly give them a degree of insulation. The UK where I would suggest people prefer easyJet to Ryanair, they likely can compete at airports like MAN/LPL/EDI etc. Business travel will continue to recover. That will help. But I believe it's only a matter of time until Wizz and easyJet tie the knot.
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I'm not sure you could find a room for potential merger talks which would be big enough to house all of the egos for that one. I don't see it myself, but I do agree that until or unless easyJet manage to get their share price back up again, they are definitely a take-over target.
The Ryanair figures yesterday just go to show the true extent of the gap. Yes, easyJet's costs at major airports will be far higher and that's inevitable - but the point of being in those major airports is that your revenue base should also be higher, so your margin should be at least as strong. It very clearly isn't. The easyJet figures are available from their own management presentations and data so are definitely "public domain", which Ryanair reference in their presentation.
Crew costs are interesting. For as long as easyJet keep doing things like flying overnight MAN/DLM/MAN on Saturdays getting back at 5am on Sundays, which takes a crew out for pretty much three whole days, then easyJet's crew-to-aircraft ratio will be a lot higher than Ryanair's. They look to have an increasing number of days where three sets of crew are needed for one aircraft and I can't think that ever happens in Ryanair. On the face of it, it looks very much like poor planning and management of capacity - which is where I happen to think a lot of easyJet's problems lay.
The Ryanair figures yesterday just go to show the true extent of the gap. Yes, easyJet's costs at major airports will be far higher and that's inevitable - but the point of being in those major airports is that your revenue base should also be higher, so your margin should be at least as strong. It very clearly isn't. The easyJet figures are available from their own management presentations and data so are definitely "public domain", which Ryanair reference in their presentation.
Crew costs are interesting. For as long as easyJet keep doing things like flying overnight MAN/DLM/MAN on Saturdays getting back at 5am on Sundays, which takes a crew out for pretty much three whole days, then easyJet's crew-to-aircraft ratio will be a lot higher than Ryanair's. They look to have an increasing number of days where three sets of crew are needed for one aircraft and I can't think that ever happens in Ryanair. On the face of it, it looks very much like poor planning and management of capacity - which is where I happen to think a lot of easyJet's problems lay.
I'm not sure you could find a room for potential merger talks which would be big enough to house all of the egos for that one. I don't see it myself, but I do agree that until or unless easyJet manage to get their share price back up again, they are definitely a take-over target.
The Ryanair figures yesterday just go to show the true extent of the gap. Yes, easyJet's costs at major airports will be far higher and that's inevitable - but the point of being in those major airports is that your revenue base should also be higher, so your margin should be at least as strong. It very clearly isn't. The easyJet figures are available from their own management presentations and data so are definitely "public domain", which Ryanair reference in their presentation.
Crew costs are interesting. For as long as easyJet keep doing things like flying overnight MAN/DLM/MAN on Saturdays getting back at 5am on Sundays, which takes a crew out for pretty much three whole days, then easyJet's crew-to-aircraft ratio will be a lot higher than Ryanair's. They look to have an increasing number of days where three sets of crew are needed for one aircraft and I can't think that ever happens in Ryanair. On the face of it, it looks very much like poor planning and management of capacity - which is where I happen to think a lot of easyJet's problems lay.
The Ryanair figures yesterday just go to show the true extent of the gap. Yes, easyJet's costs at major airports will be far higher and that's inevitable - but the point of being in those major airports is that your revenue base should also be higher, so your margin should be at least as strong. It very clearly isn't. The easyJet figures are available from their own management presentations and data so are definitely "public domain", which Ryanair reference in their presentation.
Crew costs are interesting. For as long as easyJet keep doing things like flying overnight MAN/DLM/MAN on Saturdays getting back at 5am on Sundays, which takes a crew out for pretty much three whole days, then easyJet's crew-to-aircraft ratio will be a lot higher than Ryanair's. They look to have an increasing number of days where three sets of crew are needed for one aircraft and I can't think that ever happens in Ryanair. On the face of it, it looks very much like poor planning and management of capacity - which is where I happen to think a lot of easyJet's problems lay.
Ryanair have always been home and in bed by 1am, easyJet less so but highlighting the MAN DLM which, like you say, is only once weekly, and a former TCX slot isn’t a particularly representative argument. Those type of flights are few and far between in the greater scheme and are restricted to the U.K. AOC. It also doesn’t take a crew off roster for three days. They tend to be similar to extended FDP flights to TLV, SSH and HRG, the latter two being ‘trips’ this summer but which will bolster resilience.
I don’t tend to take much notice of financial analysis if I’m honest, more of an operational person, interesting nonetheless and suffice to say the share price is being stubbornly stuck around the £5 mark.
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I find airline financials fascinating.
Ryanair also say they will be growing faster than easyJet over the next few years - up to 660 aircraft by end of 2027 vs up to 380 aircraft for easyJet by end of 2026.
If you are an investor seems to be a no brainer who to go with as one company is promising to deliver more profit and faster growth.
Interesting challenges ahead for the orange company.
Ryanair also say they will be growing faster than easyJet over the next few years - up to 660 aircraft by end of 2027 vs up to 380 aircraft for easyJet by end of 2026.
If you are an investor seems to be a no brainer who to go with as one company is promising to deliver more profit and faster growth.
Interesting challenges ahead for the orange company.
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Former IAG Strategy Director Robert Boyle has written about easyJet and Ryanair's results and their relative cost performance:
https://www.gridpoint.consulting/blo...ropes-airlines
https://www.gridpoint.consulting/blo...ropes-airlines
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