easyJet (LSE:EZJ) shares have been pummelled in recent years as the pandemic led to the international grounding of aircraft. In the last six months, they’re down 40%. With travel back though, is now the time to add this company to my portfolio? Let’s take a closer look.
Fewer restrictions, greater capacity
As international restrictions were brought in to try and control the pandemic, easyJet was forced to cancel virtually all flights. More recently though, things have been looking brighter for this short-haul airline.
With the shares currently trading at 429p, results for the three months to 30 June appear to reveal a recovery for the airline.
During that time, it flew 22m passengers. This is a monumental increase compared with the same period in 2021, during which it carried only 2.9m passengers.
For the most recent quarter, the firm operated at 87% of 2019 capacity. In terms of capacity, this is a major increase compared to a year ago, when this figure stood at just 16%. The firm forecasts that next quarter’s number could reach 90% of 2019 levels.
While capacity shows the number of passengers that could be carried, load factor reveals the proportion of available seats that were filled.
For the same three months to the end of June, the load factor was 88%. This is compared with 66% for the period in 2021.
Improving finances
All of these factors point to improving conditions for airlines. With more planes and passengers in the sky, it’s possible that financial results will accordingly begin to get stronger in the coming months.
However, in the most recent quarter the business posted a pre-tax loss of £114m. This was mostly down to flight cancellations. These arose because of staff shortages following heightened demand for flights.
While this has clearly dented recent results, I view this issue as short-term in nature and think that it could subside soon. In addition, easyJet has embarked on a cabin crew recruitment campaign. As part of the plan, it will pay new staff a £1,000 sign-on bonus. If successful, this could be helpful in avoiding future cancellations.
Although the company posted a loss in the last quarter, it still made strides with its revenue. During that period, revenue grew from £213m to £1.7bn year on year.Â
Additionally, the firm has a total cash balance of $2.9bn and operating cash flow of just over £500m. This should be enough to support the business in the event of any further pandemic variants arising in the near future.
Overall, easyJet has been through a very difficult time and the share price is understandably low. While it’s not out of the woods yet, capacity numbers strongly suggest that more customers are flying. This is good news and could filter into future balance sheets. Although the business reported a loss last quarter, I think it may turn profitable in the near future, given the resurgence in international travel. I will add the company to my portfolio soon.