easyJet (LSE:EZJ) shares moved upwards on Tuesday after the airline released its earnings for the last quarter.
However, the earnings didn’t make great reading. So let’s have a closer look at the airline’s recent performance and see whether this stock is right for my portfolio.
A tough year
If I had invested £1,000 in easyJet shares a year ago, today I’d have £550. As a shareholder, I would have been presented with a rights issue back in September. Existing holders bought 93% of the new shares on offer in its £1.2bn offering.
It’s clear that the last 12 months haven’t been good for easyJet, with the share price falling 45%. I, like many other investors, thought the worst was behind the airline this time last year. But I was wrong, there was plenty more pain to come.
Recent performance
On Tuesday, easyJet said that cancellations and delays caused by staff shortages had cost it £133m over its latest quarter to the end of June. The staff shortages have impacted both airlines and airports, causing the so-called travel chaos.
Headline losses before tax came in at £114m.
easyJet said it has worked to minimise the impact of staff shortages in the months ahead. “We have taken action to build the additional resilience needed this summer and the operation has now normalised,” chief executive Johan Lundgren said in a statement.
The group said it operated 95% of its scheduled flights during the quarter. It said July, August, and September were currently 71% booked, adding that the load factor was slightly ahead of 2019. Ticket yield for the coming quarter was 13% above pre-pandemic levels.
Outlook
Demand for travel is clearly still high, despite the travel chaos. And easyJet expects to fly near to its pre-pandemic levels from now until the end of the year. So there are plenty of positives to take away from today’s report.
However, there are clearly some issues too.
Covid-19 hasn’t gone away and it will continue to impact travel, both in terms of staffing, and passenger travel plans.
I’m also concerned about the impact of fuel prices. easyJet, like many of its peers, hedges fuel prices to reduce the impact of price spikes on the company’s profitability. The airline said it was 71% hedged for the second half of the year.
But Russia’s war in Ukraine has pushed oil prices up, and eventually easyJet will be fully exposed to higher prices unless the spot price falls. I’m unsure what will happen on oil, although I think lower economic growth around the world might see oil prices fall by the end of 2022.
Would I buy easyJet shares?
I already own easyJet shares, but at the current share price, I wouldn’t hesitate to buy more. I don’t think we’re going to see the price shoot up in the near term, but in the long run, the airline will recover. I don’t see long-term demand for travel falling, particularly on European routes.