EasyJet plc
Weekly Valuation: EasyJet plc – Valutico | 13 May 2022
To see the full valuation, click here.
Corona easing across Europe has British airline easyJet optimistic about a further upturn in travel
Due to the Europe-wide Corona concerns easing, the British airline easyJet remains optimistic about a further upturn in travel. This is despite more corona-related illness among crew members, which has affected business somewhat recently. “We remain confident in our plans to achieve flight supply close to 2019 levels this summer,” easyJet chief executive Johan Lundgren said when presenting preliminary financial results in April.
In April, easyJet’s flight supply was already at 80% of pre-crisis levels, although customers were still booking at shorter notice ahead of scheduled departures, according to the company’s Luton office near London. In the current quarter to the end of June, management aims to lift flight supply to 90% of pre-Corona levels. That’s because people have booked more flights in recent weeks than at the same time in 2019, and flights to Mediterranean summer destinations such as Greece are also much more in demand, Lundgren said in a conference call with journalists.
However, higher cases of illness among the workforce are clouding expectations. According to industry expert Harry Gowers of US bank JPMorgan, easyJet is struggling with employee illness and resulting flight cancellations much more than its competitors Ryanair and Wizz Air.
In the second fiscal quarter to the end of March, the number of easyJet flights increased sevenfold year-on-year to around 82,200, while the number of passengers rose from around 1.2 million to 11.5 million.
Compared to the same period last year, which was hit hard by Corona lockdown measures, the adjusted pre-tax loss for the winter half year to the end of March is expected to narrow from £701 million to between £535 million and £565 million. However, the adjusted pre-tax loss would still be about twice as high on average as in the first half of the 2019 financial year.
Valutico valuation
Using our flow-to-equity analysis, we arrive at a value of GBP 3.829 billion, very close to the current market cap of GBP 3.821. We have used a cost of equity of 11.0 % as discount rate. The multiple analysis prices the company a little higher. Overall the result suggests that EasyJet is probably fairly valued. Whether staff illness, high debt or high pre-tax losses will keep this valuation constant will soon become clear.
To see the full valuation, click here.
