If you haven’t been following easyJet (LSE: EZJ) recently, you might be surprised to hear how well its shares have been doing. The budget airline has seen its share price soar from £5 to over £14 in the last twelve months, taking the company into the FTSE 100 index and its market value to £5.5bn.
Its shares have done noticeably better than long-term rival Ryanair (LSE: RYA), which has risen a mere 75%. Ryanair still commands the larger market value, however, at £8.7bn.
Today, easyJet issued a pretty impressive trading update for its third quarter. Revenue rose 11% to £1.14bn, due to a 2.6% increase in the number of passengers carried, and a near 7% rise in revenue per seat.
It also predicted full-year profits would be between £450m and £480m, a big jump from the £317m reported last year.
easyJet has been able to take advantage of struggling national carriers across Europe, expanding capacity particularly in the UK, Switzerland and Italy. It is also looking at longer routes to Moscow and Egypt, plus it is making gains in the business travel market, where passenger numbers increased by over 4%
Expanding the fleet
And it has big expansion plans laid out for the next 10 years. 135 new Airbus jets have been ordered for the period from 2015 to 2022, at a total cost of $12bn.
Over half of these planes will replace existing aircraft, but this order should enable easyJet to increase its capacity by 3-5% a year, and have a fleet of around 300 in a decade’s time. It should also drive down cost per seat with many of the new A320neos able to carry 180 passengers versus the current 156 capacity for the A319.
easyJet’s balance sheet has improved significantly over the last year as well. It now has net cash of over £700m compared with net debt of around £50m at the same time last year.
Investors lapped up the good news, with the shares soaring over 6% in early trading to stand at 1,425p. This puts the shares on a forward P/E multiple of around 16 times for the current financial year.
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> Stuart does not own any share mentioned in this article.
