Jet2 has reported a £400m windfall from the surge in jet fuel prices, which had sparked widespread concern that summer holidays could be scrapped and airlines might collapse. The package holiday operator revealed that it weathered the travel disruption brought about by the Middle East conflict, instead reaping a £388m balance sheet boost from soaring jet fuel prices.
Fuel contracts soar amid conflict
Having already secured low fuel prices with its suppliers, the rising market cost of fuel meant the value of Jet2's fuel contracts rocketed during the conflict. The AIM-listed company stated that an additional £388m in income was 'primarily due to favourable fair value movements in jet fuel derivatives at the balance sheet date as market pricing increased following the escalation of conflict in the Middle East'.
Earlier this year, the UK had been warned that it is the 'most exposed' to a jet fuel crisis, prompting ministers to act swiftly to safeguard airlines' access to fuel and suspend airport capacity restrictions, as reported by City AM.
Strong booking momentum despite uncertainty
In its annual accounts published on Wednesday, Jet2 sought to push back against the pessimism that has hung over travel firms, stating that recent 'reduced geopolitical uncertainty' has driven 'strong booking momentum' in recent weeks. The firm's share price surged by nine per cent to 1,486p at Wednesday's market open, leaving the stock up five per cent for the year to date.
However, Jet2 acknowledged that travel uncertainty stemming from the Iran conflict is prompting holidaymakers to make more last-minute bookings than is typical. The airline attributed a 67 per cent drop in its cash inflow to £77m in the year ending March to 'customers delaying their holiday bookings following the start of the conflict'.
CEO warns against treating aviation as 'cash cow'
Jet2 chief executive Steve Heapy cautioned Andy Burnham against treating the aviation sector as a 'cash cow' following the disclosure of £50m in additional tax burdens. Addressing shareholders on Wednesday morning, he urged future Prime Ministers that raising taxes on airlines 'increases the price of flying' for Brits, as Burnham appears poised to enter Downing Street later this month.
Heapy said: 'Don't treat the aviation or holiday industry as a cash cow, because taxes increase the price of flying. I would caution against continuing the policy of taxing the industry. Last year, as you've seen from the results, we absorbed 50 million pounds of additional regulatory costs that were imposed on us. I think you know enough is enough.'
Share buyback and financial performance
The company announced a new £250m share buyback programme, stating it reflects its 'strong liquidity, confidence in the medium-term outlook and disciplined approach to capital allocation'. Jet2 recorded a four per cent rise in revenue over the period to £7.5bn, though pre-tax profit fell by seven per cent to £551m, largely due to reduced returns on its cash deposits. The holiday provider boosted its seat capacity by eight per cent to 24 million in the year to March, carrying 20.8 million passengers — five per cent more than the prior year.
Expansion beyond Northern roots
In March, the company launched a six-aircraft operation at Gatwick, describing it as a 'pivotal movement in our growth journey as we continue to advance beyond our established Northern roots'. Jet2 now operates within a 90-minute drive of more than 90 per cent of the UK's population, the firm confirmed.
Richard Hunter, head of markets at Interactive Investor, said that Jet2 has proved 'it is no minnow. It is the third largest airline in the UK behind British Airways and easyJet, ahead of TUI and Virgin Atlantic.' The company's £6.2bn market capitalisation makes it the second-largest business on the AIM market, and Hunter noted it would 'comfortably' qualify for the upper end of the FTSE 250 were it to make the switch.
Heapy said: 'We took more customers on holiday than ever before, delivered record revenue and achieved a resilient operating profit performance even after absorbing Gatwick start-up investment and wider industry cost pressures.'
Founded in 2003 and headquartered at Leeds Bradford Airport, Jet2 offers a choice of more than 5,500 hotels and 3,750 villas across 80 destinations and operates X planes.
