Why I think easyJet is a glaring buy

Key points

• For the final three months of 2021, revenue increased fivefold, year on year
• During the same period, the airline flew 11.9m passengers, compared to 2.8m for the same period in 2020
• Some countries, like Norway, have removed all pandemic-related entry restrictions

The Covid-19 pandemic battered the entire airline industry. With a resurgence in international travel, however, I’m finding the easyJet (LSE:EZJ) share price increasingly attractive. In addition, recent results suggest the company is turning a corner (though past performance is not a reliable indicator of future performance). At the time of writing its shares are trading at 455p, and I want to know if I should add this firm to my long-term portfolio. Let’s take a closer look.

Recent results and the easyJet share price

In a recent trading update for the three months to 31 December 2021, group revenue increased nearly fivefold to £805m. Additionally, pre-tax losses almost halved to just £213m. For me, this is a strong indication that the business is starting to benefit from the lifting of international travel restrictions.

Another important metric for gauging airline recoveries is the load factor, together with passenger numbers. The load factor shows the number of passengers that travelled as a proportion of the available seat capacity.

For the final three months of 2021, easyJet flew 11.9m passengers. This represented a load factor of 77%. Conversely, for the same period in 2020, the airline flew just 2.8m passengers. This was a load factor of 66%. This tells me that more passengers are flying and more easyJet aircraft are in the skies. Rival airline jet2 is not enjoying the same trend. While its passenger capacity is rising, its load factor is falling.   

Improving conditions

With the escalating military situation between Russia and Ukraine, both Evraz and Polymetal International, firms operating in the region, will be demoted to the FTSE 250. There is some speculation that easyJet will join the FTSE 100. This could be good news for the easyJet share price, as FTSE 100 tracker funds will begin holding the company.

It is worth noting, however, that this conflict has also resulted in rapidly rising oil prices. The repercussions for the airline industry could be negative, because the price of jet fuel may well increase. This could eat into easyJet’s future balance sheets. Furthermore, any new Covid-19 variants could mean trouble for international travel. In this scenario, the easyJet share price may suffer. 

However, some countries have started removing all pandemic-related restrictions. Norway, for instance, has returned to pre-pandemic entry requirements. Furthermore, Sweden implemented similar measures, but limited this to EU citizens for now. Also, the investment bank Liberum recently placed a ‘buy’ rating on easyJet, stating that it thought “restrictions will be eased appreciably for travel at Easter”. 

The future looks bright for the easyJet share price, given recent results and the fact that the pandemic appears to be retreating. All this being said, investing puts capital at risk — shares and any dividend income may fall as well as rise and isn’t guaranteed — so you may get back less than you invested. I still think it is indeed a glaring buy for my portfolio, though — I will purchasing shares without delay!