Despite the Headwinds, easyJet Are Getting By

Right off the bat, the headline loss for the first half was £552 million, as opposed to £394 million from the previous year — a 40% wider loss. That's disappointing, but there was passenger growth of 6% year-on-year and the load factor improved by 2 percentage points to 90%.

H1 key financials

Revenue was up 12% to £3,954 million, which is good. Passenger revenue was up 10%, ancillary revenue was up 10%, and holiday revenue was doing very nicely at 30% growth to £518 million. They have £4.7 billion of liquidity and net cash of £434 million, so they appear to have a good amount of cash in reserve. All in all, these figures are fine.

The holiday side continues to be the growth engine. They've opened up easyJet holidays in 500 high street retailers in Berlin to help accelerate growth in Germany. It's interesting that the company has done a full circle on their original plan. easyJet was set up with a phone number and early days of internet selling — the whole premise was that you didn't go via travel agents. Now they're pushing their holiday offerings into retailers.

They have also set up new bases in Marrakech and Newcastle. I would imagine these are reasonably small incremental additions to their flying bases.

A similar story to other airlines — the Iranian conflict has resulted in a later booking curve. Consumers are waiting until nearer to their holiday dates to book flights. This was a trend that was happening anyway, but bookings on the month of departure are showing year-on-year growth.

Forward bookings position

The company is expecting that the second half will be much more impacted by the Middle Eastern conflict. My personal belief is yes, that is likely to happen. But I'm not too sure that easyJet's locations are going to be so badly affected. I'm still expecting them to achieve okay figures for this year.

They do have fuel hedging in place, which has helped them avoid the cost of elevated prices. But they have suspended additional hedging because of the high fuel prices. This is a bit of a bet on the assumption that the Iranian crisis is going to stop relatively soon, and that fuel prices are going to come down from their current positions. That could come and bite them back if things go in a different direction.

I don't blame them for that. It makes a lot of sense to me. On a probability basis, you would not want to do too much fuel hedging going forwards at current elevated prices. But that is a risk.

Fuel hedging position

Citi notes that the FY 2026 profit before tax outlook remains challenging, expecting consensus to shift from £257 million toward break-even to their £102 million estimate. That's a wide range of outcomes.

I'm assuming profit before tax for the full year — before a one-off adjustment — would come in at approximately £690.6 million. I then expect an £80 million one-off adjustment relating to the current crisis disruption: potentially higher fuel costs, lower booking figures, and other issues. After 25% tax, profit after tax would be £457.9 million, equating to earnings per share of 61.2p.

My full-year estimate

I'm giving it a further 20% reduction on the share valuation because of the uncertainty in the marketplace, my concern about fuel charges going forwards into the longer term, and the general economic outlook. The airlines thus far have been extremely resilient to weaknesses in consumer spending — consumers continue to want to purchase their airline tickets, and seem more likely to keep up that spending than in many other areas. Nonetheless, I think it could have an impact.

VALUATION SNAPSHOT

• Suspended fuel hedging: A calculated bet that fuel prices will fall. If the Iranian crisis persists or worsens, unhedged exposure at $1,350/mt spot versus $726 hedge price could materially impact profitability. Every $100/mt move costs approximately £35 million.
• Late booking curve persisting: Consumers booking closer to departure reduces forward visibility. If this extends beyond the crisis, it becomes a structural issue for capacity planning.
• H2 profit risk: Citi expects FY 2026 profit before tax consensus to shift from £257 million toward break-even. The range of outcomes is unusually wide.
• Risk factor at 63%: This is a high risk factor, reflecting the genuine uncertainty about the external environment. The 44% probability weighting is correspondingly cautious.
• Depreciation trajectory: Net depreciation up 9% to £391 million. As the fleet modernises with A321neos, depreciation charges will continue to rise and weigh on reported profits.

• Iranian crisis de-escalation: Would immediately improve bookings visibility, reduce fuel price risk, and support removing the 20% valuation discount.
• Fuel prices below $900/mt: Would allow resumption of hedging at more favourable rates and reduce the unhedged exposure risk.
• easyJet holidays profit before tax above £150 million full-year: Would validate the holidays strategy as a genuine structural margin improver.
• Share price below 300p: Would widen the value opportunity further and increase the dividend yield to above 4.5%.
• Load factor sustained above 90%: Would demonstrate that underlying demand remains robust despite the geopolitical uncertainty.