easyJet FY preview: Where next for the easyJet share price?

A new COVID variant threatens to cast the airline and travel industry back into turmoil as new travel restrictions are introduced. We have a look at what it could mean for easyJet ahead of its annual earnings.

When will easyJet release full year earnings?

Low-cost airline easyJet is scheduled to release full year results on the morning of Tuesday November 30. This will cover the 12 months to the end of September, 2021.

 

easyJet FY earnings preview: what to expect from the results

It was always going to be a long road to recovery for the airline industry after being pushed to the brink by the pandemic, but airlines have started to recover as countries have eased travel restrictions this year thanks to the rollout of vaccines.

easyJet conducted 155,664 flights over the year and carried 20.4 million passengers at a load factor of 72.5%. As outlined below, activity over the first three quarters were depressed thanks to strict government restrictions on travel before ramping-up in the fourth quarter over the three months to the end of September as travel rules eased.

Q1 2021

Q2 2021

Q3 2021

Q4 2021

No of Flights

23,428

11,672

24,682

95,882

Passengers (Mns)

2.86

1.23

2.99

20.43

% of 2019 Capacity

18%

9%

17%

58%

Load Factor

65.70%

60%

66%

72.50%

(Source: easyJet)

Still, capacity only reached 58% of pre-pandemic levels in the fourth quarter, but that is forecast to rise to 70% in the first quarter of the new financial year over the last three months of 2021.

But news that the COVID-19 virus has mutated into a new variant threatens to plunge the industry back into chaos. The UK is now investigating a new variant that has been identified in Botswana and South Africa which health secretary Savid Javid said ‘may be more transmissible’ and that existing vaccines could prove ‘less effective’ against the strain compared to the Delta variant that has become dominate in most countries over the last year. It has already been found elsewhere, including Hong Kong and Israel, showing it has already spread overseas.

South Africa, along with five other African countries, have been placed on the UK’s red list until Sunday, after which arrivals will have to quarantine in hotels. Germany, France, Italy, the Netherlands, Austria and the Czech Republic are among European nations to have already imposed travel restrictions to the region. Meanwhile, reports suggest the European Commission is keen to flex its power to impose similar rules across the entire block following a meeting to be held later today.

For now, easyJet’s key travel corridor between the UK and Europe remains intact, but with a new variant circling, there will be concerns that may not be the case for long. Things could develop rapidly from here, but it is bad news for airlines no matter which way you look at it. That was reflected in the steep declines saw in airline stocks today, with easyJet down over 10%, IAG down 14%, and Ryanair down 8.8% this afternoon.

easyJet has rightly refrained from providing financial guidance for the new financial year due to the short-term uncertainty plaguing the industry, but investors will be keeping an eye on how easyJet has performed in the first two months of the new year and for any outlook concerning the second quarter, especially in light of the new variant. There was barely any visibility when it came to the outlook before this new variant emerged, and more uncertainty has been injected into an already uncertain situation.

The airline had said its recovery was being led by demand for people after some winter sun or city breaks over the coming months, but it will be the next peak holiday season in the summer of 2022 that will prove pivotal if easyJet and the wider industry wants to have any chance of staging a material recovery next year. But, with travel restrictions forcing people to book closer to departure dates and reluctant to book anything too far down the line to avoid the risk of being hit by travel restrictions, easyJet has little-to-no insight into what the industry will face over the coming weeks, let alone next summer.

All investors can hope for is that the new variant isn’t as dangerous as first thought and, in the meantime, that easyJet continues to adapt and keep tight control over costs. Fortunately, a £1.2 billion rights issue completed in September has helped shore-up the balance sheet and strengthen the airline’s financial position should the industry be plunged back into turmoil by fresh travel restrictions. Net debt dropped to around £900 million at the end of September from £2.0 billion at the end of June as a result, and it managed to generate around £40 million in cash during the fourth quarter.

With the future uncertain, let’s look at what to expect from the results covering the 12 months to September. Analysts forecast annual revenue will come in around £1.44 billion, with £1.00 billion of that being booked in the fourth quarter alone. That would be down from £3.00 billion the year before, which in turn plummeted from the £6.39 billion booked in the 2019 financial year before the pandemic hit.

The company has said its headline loss before tax will be in the range of £1.135 million to £1.175 million for the full year, wider than the £835.0 million loss booked last year, which had turned from the £427.0 million profit booked in 2019.

The headline profit after tax is expected to swell to £976.2 million from the £725.0 million loss seen last year, which in turn swung from the £349.0 million profit booked in 2019 before the coronavirus crisis started. The total pretax loss is expected to come in at £1.12 billion compared to the £1.27 billion loss booked the year before, which in turn sank from a £430.0 million profit in 2019.

 

Where next for the easyJet share price?

The easyJet share price has been trending lower since early May when it hit a post pandemic high of 921p. Since then the price has formed a series of lower highs and lower lows. 

More recently easyJet is extending the move lower following rejection at the 100 sma. The price has taken out the 50 sma. However, the RSI is in oversold territory so some easing back or at least some consolidation could be seen. 

Sellers will be looking for a move below 457p, today’s low, to bring 386p, the November 20 low, into play. 

Any meaningful recovery would need to see a move back over 540p, the November 22 low. 

Where next for the easyJet share price?

 

How to trade easyJet shares

You can trade easyJet shares with City Index in just four easy steps:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for ‘easyJet’ in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade

 

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