easyJet (Baa2 S, BBB P) 3Q (3m to June) Trading update

Equities are volatile (£3.4b market cap) and reversing only some of the slide over the last week. Still numbers it gave were impressive in that it bucked close peer Ryanair and network carriers Lufthansa & Delta by guiding to flat yields yoy. Most thus far are facing falls (Ryanair double digit).

easyJet runs a net cash position (£456m at Q3) but has sizeable capex plans over the coming years; net Capex of £1.2b in FY24 that rises to £1.6b in FY26 and £3b in FY28. It is committed to IG ratings (as is nearly every airline) but we still struggle to see value in the €28/31s that price at the bottom end of the sector. Hasn't stopped cash moving -6-7bps today.

Worth noting investors are exposed more and more to the faster growing and higher margin holidays business; on the bottom line it's contributing circa 30%. It's not necessarily a bad thing; asset light, low fixed costs etc. but with different barriers to entry. It used to outsource this and only clip a smaller percentage of sales, current CEO (was previously CEO of TUI) helped make that (successful) shift to internalise in 2019.

• In Q3: passengers +8% & capacity +7% leaving load factor unch at 90%.
• RPS +1%, CASK ex. fuel flat yoy, total CASK -1% from falling (-1%) fuel cost.
• Group revenue was £2.6b (+11%) within which Passenger at £1.6b (+7%), ancillary airline £0.7b (+11%) and Holidays £0.3b (+42%).
• Group EBIT was at £234m (+16%) at a 8.9% margin (+40bps). Holidays is likely helping the group margin here; it says EBT from it was £73m (implues 22% margin).
• BS boosted from net cash £304 to £456m position.
• It's a lighter 65% hedged for 1H25 (sept-dec) fuel at 830 and the 3-months following hedged 31% at 813. Spot below those levels right now {JET1NECC Index; 793}.
• FY24 (12m to Sept) guidance: Q4 RPS to continue trend from Q3 (was up +1%), easyJet holidays to deliver >£180m PBT (>48%yoy), 2H CPS ex. fuel to be up LSD yoy, 2H fuel flat.