Franchise value & capital allocation are underappreciated
The valuable airport slots it controls and the routes it flies, combined with the ability to optimise capital allocation to the right routes is a differentiator
An overview of the main reasons to invest and the key risks involved.
The valuable airport slots it controls and the routes it flies, combined with the ability to optimise capital allocation to the right routes is a differentiator
The plane fleet upgrade expected to roll-out between now and 2028 is EZJ's biggest lever to create significant value.
The complementary business of offering holiday packages to its captive airline passenger base has really taken off and is expected to expand substantially from here.
The airline industry is highly sensitive to economic downturns, fuel price shocks and geopolitical instability
Airbus, the manufacturer for EZJ's 320/321neo new plane orders, is experiencing delivery delays to all its customers
Not an immediate issue but could become more challenging for easyJet in 2027 and 2028 when capex needs rise in conjunction with a substantial increase in new aircraft deliveries
easyJet is one of Europe’s leading low-cost airlines, providing affordable air travel across a wide network. Known for its efficiency and strong customer service, easyJet operates a fleet of more than 300 aircraft, primarily in the short-haul market. The company is also diversifying its revenue streams by expanding its easyJet Holidays platform, which offers integrated vacation packages, creating a more comprehensive customer experience.
Overview of buy and sell case of the business.
Key pieces of information about the business that you need to know about.
Cross-selling holiday packages (mostly flights + hotel rooms) to EZJ's 90 million captive airline passengers was a strategic no-brainer. This business has posted 47% CAGR in the past 2 years, with +25% customer growth expected in 2025. It has 3 million customers and is already generating EBITDA margins in line with the rest of the group at 15%. Its capital-light nature is a boon to EZJ'S cash flow generation, and it is ahead of schedule in meeting its target of contributing >25% of the group's PBT.
The franchise value of EJZ's low-cost airline revolves around the dominant European short-haul market position in slot-constrained airports (>80% of their capacity), and the valuable 1,100 routes it flies across 35 countries. Testament of its franchise = ~90% of available seats were filled in each of the past 2 years, and prices have held steady (with +1% ticket yields in 2024). Capital allocation holds the key to generating above-industry-average revenue growth. For easyJet, capital allocation comes via increased capacity (+5% p.a. targeted medium-term), which expands its airport network to new destinations and by optimising fleet usage towards better routes. Improved performance in winter reporting periods (1Q and 2Q for it) is real-time proof of its capital allocation skill.
The ongoing upgrade to EZJ's fleet is the key value creation lever for this stock over the medium term. This upgrade entails replacing its ageing A319 planes (1/3 of the current fleet) with more profitable new A320/321 neo aircraft, and is central to EZJ's strategic fleet plan to increase its overall fleet size by 14% by 2028. The upgrade to A320/321 neo aircraft offers increased seat capacity, material fuel efficiencies (+20-30%) and strongly enhanced productivity. The financial upside to EZJ's projects from the A319 planes being replaced is shockingly substantial = increasing the airline's PBT per seat earned by a further GBP 2 or by 50% from the airline's GBP 4.10 of PBT per seat at YE24. These fleet upgrade benefits are expected to become more visible in the 2026 results.
The key events that could drive investment opportunities and shift markets.
easyJet's holiday's growth and decent capacity growth in 2025
The holiday package business is expected to remain the revenue growth engine within EZJ as the low attachment (connected to airline tickets sold) offers tremendous upside, and it is projecting +25% growth in customers in 2025. In terms of capacity, EZJ is planning for 8% growth in 2025, with a new airport soon to open in Southend, short-haul opportunities in the summer of 2025 in Linate and Rome Fiumicino, and some new winter sun network points in North Africa and the Canaries.
Value creation realized via planned fleet upgrade
easyJet's schedule of airline deliveries/fleet expansion is well mapped out for investors in the fleet plan up to 2028. EZJ projects that this fleet plan has the potential to uplift profits substantially via expanded capacity, higher productivity and improved fuel efficiency. Capacity wise, this plan sees the size of their fleet expanding by 14% and its average seat gauge increasing by 7% from 2024 levels.
Substantial efficiency improvements eventually come through
EZJ's strategic long-term focus is to better leverage its key assets (passengers & fleet) to drive improved margins. The advantage of having a network of Europe's slot-constrained airports is also with a high non-fuel expense base (like airport/ground/crew). easyJet needs to deliver better efficiency (+4-5% point uplift in EBITDA margin) from this network in order to reach its stated GBP 1Billion pre-tax profit target.
Key pieces of information about the business risks that you need to know about.
EJZ's starting point is fairly decent, being a modest net cash position and with > GBP 2bn of untapped borrowing capacity at its disposal. The forthcoming capex ramp relates to its ambitious plans for fleet upgrade/expansion as its target to own 75% of new planes vs leasing them. Based on current financial performance, this looks like a non-issue for EZJ in 2025 and 2026, as it can probably fund these years through internal funds and existing credit facilities. It is in 2027 and 2028 when new aircraft deliveries significantly ramp up that it will need to crank up cash flow generation levels and tap into further debt funding.
Airlines are viewed as a highly cyclical business, making the sector vulnerable to sharp economic downturns, geopolitical conflicts and global pandemics. The sector frequently gets discounted for any top-down risk that shakes consumer demand or an international or regional-based travel appetite. The airline industry is very exposed to oil/jet fuel price shocks - fuel costs are EJZ's single highest expense line (even with easyJet hedging much of its exposure to this).
The fact that Airbus (and Boeing) are experiencing delivery delays to all the customers is no secret. This is likely to present a challenge to EZJ achieving Phase 1 of its plan to upgrade/increase its fleet size by 15% by 2028 to 395 aircraft. This 2028 phase entails a massive order with Airbus of ~100 NEO family aircraft expected to be delivered in the next 4 years. EZJ is sticking to the 395-plane fleet expectations for 2028 and is optimistic given the back-loaded schedule of expected deliveries (30 in '27 and 43 in '28). Phase 2 of its fleet plan extends out to 2034 and targets a fleet size of 458 aircraft.
Quickly navigate key insights from industry experts and leverage their knowledge and market intelligence.
"The easyJet share price remains some 55% shy of pre-pandemic levels, indicating how much damage can be done by exogenous events and how difficult the recovery path can be"
“Out of 21 analysts covering easyJet, 13 rate it a Strong Buy, two say Buy and six say Hold. No one’s selling.”
"What protects airlines during downturns are strong balance sheets [and] excellent market positions in their core routes. This enables them to retain passengers as weaker competitors retreat"
“They have caught a trend that more and more people like to build their holiday packages. They have been able to leverage their customer data and their net access to the people that are booking flights directly through them to be able to offer them hotel packages as well”
Access the most recent investor updates published by the company.
EasyJet says Airbus delivery delays are holding back its fleet renewal—forcing older jets to stick around longer than planned. CEO Kenton Jarvis confirmed the UK low-cost carrier is “very focused on refleeting,” but bottlenecks in Airbus’s supply chain have slowed the arrival of newer, fuel-efficient aircraft. The airline aims to retire its older A319s over the next three years, but for now, they’re staying in service. That lag is capping growth. Seat capacity for summer 2025 is set to rise just 1%, as European carriers across the board contend with tight supply. “There’s a ceiling on capacity going into summer,” noted Ronan Murphy of Alton Aviation Consultancy—adding that limited availability may help prop up fares. Despite the challenges, EasyJet remains bullish. Forward bookings for Q3 are 80% sold, with holiday demand expected to grow 25% year-on-year. New destinations like Luxor and Cape Verde launched slowly but are expected to strengthen winter performance. Jarvis also pointed to falling oil prices as a cushion for costs, though rising expenses elsewhere will likely prevent a summer of fare wars.
A curated collection of third-party content relevant to the company and sector to help inform your investment decision.
There are concerns about costs and currencies, but otherwise analysts are scratching their heads about this cheap airline stock. Here’s why they think it’s a buying opportunity.
Meet the experienced professionals leading our organization
Here are the questions that professional investors are asking before making an investment decision.
So far, EZJ is cross-selling packages to 3 million passengers, focusing on all-inclusive packages, mostly 4-5-star hotel bookings (5,000 hotels). >60% of the bookings are made directly by the hotels. Acquisition costs are low, and the majority of the bookings are via unpaid channels - an approach the UK OTA operators (who charge a 10-30% commission) cannot replicate. EZJ's passenger base is well suited to future package holiday cross-selling, as only 12% of their seats were sold to 3rd party OTA's (in 2023).
The swap of its A319s for new A320neo planes is a key catalyst for value creation (in 2026 and beyond). The cost benefits offered via this switchover to A320neo aircraft are material and across the board: +19% more seats, +24% reduced fuel burn, +15% productivity, +5% airport/ground handling/navigation efficiencies.
EZJ substantially hedges both its exposure to fuel prices and its USD exposure. For both, this hedges its exposure over the next 3 half-year periods, with more hedging in the earlier periods (75-80% of exposure) and less in the furthest period (25%). For fuel, these hedges typically protect levels meaningfully above current spot rates and for USD at current or slightly higher FX levels vs. the current spot rate.
easyJet's balance sheet net cash is the first line of defence. On top of this, it currently has USD 2.1bn of untapped borrowing capacity, and has an investment grade credit rating (BBB S&P) if needed. EZJ also makes use of aircraft lease funding, with 46% of the current fleet leased.
EZJ 's model is equipped to show resilience and adaptability in the face of an airline cyclical downturn, optimising its airport network flexibility and dynamic ticket pricing model to reallocate capital as much as possible.
LSE:EZJ
GBp529.60-0.71%
GBp4.00b
9.7
4m
Pricing delayed 15 mins. Jul 1, 2025 1:00 PM
Start discovering stocks you've never heard of that match your thesis.
What is your typical investment horizon?
What is your risk profile as an investor?