Interview Synopsis

EasyJet – recovery prospects & low-cost carrier market

  • Public Equity
  • Consumer
  • Europe

EasyJet has navigated the COVID-19 pandemic well, with its net debt “pretty flat now”, a former divisional leader at the company told Third Bridge Forum. In fact, lower revenue per seat and rising operating costs were challenges faced by EasyJet and its peers before the pandemic. The expert is in “no doubt” that the pandemic has enabled EasyJet to restructure parts of its cost base — but what happens next depends on the industry’s continued recovery and the pandemic’s trajectory.

Clouds begin to lift at EasyJet

With vaccine rollouts in full swing, the main barriers to travel in recent months have been the ever-changing restrictions (particularly in the UK) and uncertainty regarding people’s ability to plan. A “high degree of seasonality” is anticipated for short-haul travel in Q4, although there’s also a strong sense of pent-up demand, we heard, particularly among those who decided not to travel this summer. 

“I think the issue is, as you get into the winter in Europe, a lot of that is the sunshine-based holidays, beach holidays, and there’s not a lot of capacity for that within Europe in the middle of winter.” Two potential benefits of this are an extension of the holiday season and a shift to long-haul (restrictions dependent). November is expected to be a quiet month. 

The Interview also considered how low-cost carriers Ryanair and Wizz Air have been able to ramp up during the pandemic versus EasyJet, with the former two players more aggressive on cost reductions. “EasyJet, I think, have still done it and done it very well, but I think there’s been a greater strength in Ryanair and Wizz to be able to do that,” the expert explained. 

Wizz Air is operating at 90-100% of its 2019 capacity compared with EasyJet’s 60%, according to the Interview. “They’re definitely more bullish in terms of the volume, and Wizz Air certainly have been operating a much higher volume. Interestingly, if we compare it to EasyJet, it’s come at a much lower revenue per seat, but actually, the cost per seat is significantly lower as well, such that they’re still turning out good numbers.”

Overall, the expert is optimistic about travel going into 2022. “I think we’ll start to see, from the end of Q3, how it’s looking in terms of customer confidence, but providing there’s no big setback in terms of fourth waves and travel restrictions, I think we will see a return of higher demand next year.”

To access all the human insights in Third Bridge Forum’s EasyJet – recovery prospects & low-cost carrier market Interview, click here to view the full transcript. 

The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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