Budget carrier easyJet plc’s first-half results today showed a company rebounding steadily from the Covid-19 disaster, with strong summer bookings narrowing headline losses from £545mln to £411mln.
Unfortunately for easyJet and the airline industry as a whole, rebounding passenger rates have been soured by a plethora of other damaging headwinds.
First and foremost were obviously the soaring fuel prices thanks to a certain dictator’s invasion of a certain country in Eastern Europe.
During the reporting period, the average market rate easyJet paid for jet fuel increased by 33%, from US$762 per tonne (£613pt) in the first half of 2022 to US$1,012 (£814) in the first half of early 2023.
Per passenger seat, airline fuel costs increased by 71% to £20.43.
easyJet’s 80% hedging strategy was able to mitigate some exposure, but in the end, overall post-hedge fuel prices of US$860 per tonne were 44% higher than the post-hedge fuel price of US$599 per tonne achieved in the same period in 2022.
On the hedging note, easyJet has a 75% hedged position for the upcoming second half at an average rate of US$885pt, 22% above current spot prices.
Destination mix put pressure on fuel prices too, with an increased average flight length “shifting towards leisure routes”.
For comparison, the average flight was 1,192 kilometres in the first half compared to 1,105 in 2019. So, more Greece and less Warsaw then.
What about beer and pretzel sales?
Coming to the rescue, though, was the significant jump in beer and pretzel sales… maybe?
Looking at the revenue mix, add-ons (easyJet calls them “ancillary products”) comprised around 27% pre-pandemic; they now make up closer to 44%.
Exactly how much of this 44% was attributed to beer and pretzels is sadly unclear.
Per easyJet’s description, ancillary products include a range of items, from leisure bundles (lounge access) and cabin bags to in-flight retail (beer, pretzels etc).
A new closed-loop WiFi option has also “facilitated enhanced marketing revenue generation opportunities”.
Whether beer, pretzels or WiFi, easyJet’s add-ons have clearly become an increasingly important part of per-seat revenues, contributing to the airline’s ancillary yield being £10.65 higher than the same period in 2019.