In the face of a growing threat of widespread lockdowns it might seem counter-intuitive to invest in a travel and holidays operator. But we believe that as 2022 progresses, Jet2 (JET2:AIM) will come roaring back on a tide of Omicron recovery. Analysts at broker Jefferies have named it their top recovery pick.

Jet2 is already one of the UK’s top airlines by the number of passengers flown, while the package holidays it offers have stood the test of time with Brits wanting a relatively inexpensive couple of weeks in the sun where everything is done for them – flights, hotel, transfers, car rental, day trips etc.

In its last full year before Covid (to 31 March 2020) it flew nearly 15 million passengers and took nearly 4 million people on holiday. It runs a flexible tour operator model that allows it to rejig its airline operations to serve the routes with the highest level of demand.

This is a strategy it’s pursued exceptionally well in the past. With overall positive brand perception, it puts Jet2 in a great position to pick up market share as the travel industry bounces back as expected through the coming months.

Current seat capacity for summer 2022 is approximately 13% higher than summer 2019 thanks to fleet agreements that secure future capacity growth. Bookings for summer 2022 remain encouraging and load factors – the percentage of available seating capacity that has been filled with passengers – are ahead of summer 2019 at the  same point.

Jet2 is also financially sound. Whereas holiday rival TUI (TUI) has needed bailing out multiple times over the years by the German government in a bid to secure jobs, Jet2 had approximately £1.5 billion of cash on its books at the last count (to end September 2021), having already raised money from investors. That excludes any deposits made by holidaymakers booking early.

Admittedly, Jet2 reported a disappointing £200 million loss for the six months to the end of September and could come under pressure if unemployment spikes. But the stock is already trading at its lowest in more than a year and the company has the balance sheet strength to absorb losses in the short-term without capping its investment for the long-term, allowing it to capitalise on industry recovery when it does take shape.

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