Jet2 took £400m boost from Iran war jet fuel spike
Jet2 recorded a £400m boost from the rising price of jet fuel which caused widespread fear that summer holidays could be cancelled and airlines could go bust.
The package holiday provider revealed that it defied the travel chaos caused by the Middle East conflict to instead take a £388m balance sheet boost from rising jet fuel prices.
Because the company had already locked in low fuel prices with its suppliers, the rising market cost of fuel meant that the value of its fuel contracts soared during the conflict.
The AIM-listed firm said an extra £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”.
The UK had faced warnings earlier this year that it is the “most exposed” to a jet fuel crisis, prompting ministers to scramble to ensure airlines’ access to fuel and to suspend airport capacity rules.
Jet2 sought to defy the gloom that has surrounded travel firms in its annual accounts published on Wednesday, claiming that recent “reduced geopolitical uncertainty” has driven “strong booking momentum” in recent weeks.
The firm’s share price jumped by nine per cent to 1,486p on Wednesday’s market open, leaving the stock up five per cent in the year so far.
Jet2 chief executive Steve Heapy warned Andy Burnham against treating the aviation industry as a “cash cow” after revealing £50m in extra tax costs.
Speaking to shareholders on Wednesday morning, he urged future Prime Ministers that hiking taxes on airlines “increases the price of flying” for Brits, as Burnham looks set 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.”
The firm unveiled a new £250m share buyback which it said reflects its “strong liquidity, confidence in the medium-term outlook and disciplined approach to capital allocation”.
But Jet2 conceded that the travel uncertainty caused by the Iran war is causing holidaymakers to book more last-minute than usual.
The airline said that a 67 per cent decline in its cash inflow to £77m in the year to the end of March was due to “customers delaying their holiday bookings following the start of the conflict”.
Jet2 saw revenue jump by four per cent in the period to £7.5bn but profit before tax slipped by seven per cent to £551m, owing to lower income earned on its cash deposits.
The holiday provider upped its seat capacity by eight per cent to 24m in the year to March and flew 20.8m passengers, five per cent more than the previous year.
In March, the firm opened up a six-aircraft operation at Gatwick, which it said marked a “pivotal movement in our growth journey as we continue to advance beyond our established Northern roots”.
The company now operates within a 90-minute drive of more than 90 per cent of the UK’s population, it said.
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 firm’s £6.2bn market cap makes it the second-largest company on the AIM market and means it would “comfortably” enter the upper end of the FTSE 250 if it made a switch, Hunter added.
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.”
Jet2 was founded in 2003 and is based at Leeds Bradford Airport. It offers a choice of more than 5,500 hotels and 3,750 villas across 80 destinations and operates X planes.