Airline and package holidays provider Jet2 (JET2:AIM) is an example of why treating your customers well is not just a good ethical position to adopt but also makes excellent business sense.

The company recently won European Airline of the Year and scores highly on review platforms TripAdvisor and Trustpilot and its excellence in this area, including during Covid when it stood out compared with several of its rivals, has enabled it gain market share and secure loyalty from existing customers. The current valuation doesn’t fully reflect Jet2’s existing business attributes, its strong balance sheet and its scope for growth.

GIVING CUSTOMERS WHAT THEY WANT

Jet2 has a range of options to suit different types of customers, whether they are looking for flight-only deals, fully inclusive holidays, luxury five-star breaks and affordable holiday experiences.

In total Jet2 provides holidays in  more than 75 established sun, city and ski resort destinations in Europe and also provides scheduled leisure flights on more than 550 routes from its UK bases.

It seems spending on a week in the sun is a non-negotiable for many UK households, whatever financial pressures they are facing, and that has been reflected in Jet2’s operational and financial performance.

The group reported record passenger numbers for the first half of its current financial year and record revenue of £5.08 billion and upgraded profit guidance for the 12 months to 31 March 2025.

Jet2’s jewel in the crown is its Jet2holidays arm. The UK’s largest tour operator is ATOL-licenced for more than seven million customers. Bookings for package holidays are more resilient and reliable than for flights and yet the company is currently trading at 8.9 times earnings – more akin to the valuation afforded a pure airline operation.

The company’s rapid growth both before and coming out of the pandemic means this is now a large business in stock market terms. Should the lure of relaxed listing rules see it move from AIM to the Main Market, then the company would comfortably be a member of the FTSE 250 and be on the cusp of FTSE 100 membership. Any such move could act as a kicker for the share price as it boosts the profile of the shares and tracker funds are forced to buy.

GROWTH AMBITIONS

The outlook both in the short and medium-term looks positive. On-sale seat capacity for winter 2024/2025 is 14% higher than 2023 at 5.11 million seats and summer 2025 on sale capacity is 9% higher than last year at 18.74 million seats..

Over the next 12 months Jet2 will launch new UK bases at Bournemouth and London Luton airports and expand overseas in Morocco (city breaks and flights to Marrakech and Agadir) as well as in Adriatic and Italian resorts.

The company has exercised the remaining 36 purchase rights of Airbus aircraft (originally announced in late 2021) meaning that the company now has a firm delivery stream of 146 A321 neo aircraft through to 2035.

Jet2 can fund this increase in capacity, with planned capital expenditure expected to total nearly £5.7 billion over the coming seven years, thanks to its strong balance sheet.

It had more than £2 billion of net cash at the last count even if this figure is inflated by the funds the company holds as customer deposits. The long-term visibility on its trajectory also means Jet2 can achieve operating cost efficiencies and plan sensibly for the future.

The company’s careful management of external risks is reflected in the fact it is 70% hedged for summer 2025 for both foreign exchange (dollar and euro) and jet fuel exposure and 100% hedged for calendar year 2025 carbon emissions allowances.

‹ Previous2024-12-19Next ›