Aircraft delivery issues and the saturated skies over Europe could be driving EasyJet’s increased focus on its tour operation as much as its desire to grow profits, industry experts have claimed.
The airline released its 2024 results at the end of last year, with a headline profit before tax of £610 million, an increase of 34 per cent year on year.
But this growth was far outstripped by its in-house tour-operator EasyJet holidays, which registered a 56 per cent increase in profit before tax to £190 million in the same period.
While it clearly makes sense to focus on a part of the business that is seeing such growth, experts believe the decision may also have been forced upon it as airline manufacturers struggle to meet demand.
Waiting list
AGB Associates managing partner and former head of ABTA’s legal services Alan Bowen says: “Right now if you want new planes to try and expand then you will be waiting for years.
“Boeing has a huge problem and they’re not delivering anything at the moment, as a result of which Airbus has an order list as long as your arm.
“The reality is you’re unlikely to be able to increase the size of your airline by adding substantial numbers of aircraft in the future.”
EasyJet certainly finds itself waiting for new aircraft; an announcement made in December 2023 for an order for 157 additional A320neo family aircraft with 100 further purchase rights also stated that 56 A320neo and 101 A321neo aircraft will be delivered between 2029 and 2034, .some five to 10 years away.
Sven Carlson Aviation Consulting managing director Carl Denton agrees this is a problem, adding: “If you’re not able to grow an airline because deliveries of aircraft are constrained then how do you grow your profit?
“You do it by diversifying into the leisure package holiday market as it gives you the opportunity to increase your margin by having an extra revenue stream.”
Bowen agrees, adding: “Package holidays are a lot more profitable as they can generate profits on accommodation cost.
“There are also so many other low cost airlines operating in Europe now that there are very few routes that airlines operate that someone else isn’t operating on, so there is constant competition.”
EasyJet holidays certainly provides the airline with that opportunity, the 56 per cent profit growth was driven by a 36 per cent increase in customers, increasing UK market share from 5 per cent to 7 per cent, and the operator has grown its UK Atol licence to a little more than 3 million passengers for the forthcoming year.
Route development
The airline added in its results that it has a medium-term target of over £250 million profit before tax and this is clearly beginning to inform the airline’s route development strategy.
Speaking at the launch of the results, EasyJet CFO and CEO designate Kenton Jarvis says: “The airline will continue to grow, particularly on popular longer leisure routes like North Africa and the Canaries and we plan to take 25 per cent more customers away on package holidays, as EasyJet holidays continues to thrive.”
The airline says in its results that it will drive this growth through targeted investments aimed at strengthening the customer base while future initiatives will “optimise pricing and increase the attachment rate, such as improving the city proposition, alongside enhancing the product offering through dynamic inventory and further ancillary products”.
Bowen agrees EasyJet Holidays’ potential to do so is huge, while the current Atol licence covers 3 million travellers the airline handled 103 million passengers last year, many of whom can be targeted with a package holiday.
However, he adds that making the move which has already seen EasyJet announce new flights to Cape Verde for 2025 as part of this strategy will bring new challenges.
Bowen says flying to Cape Verde from the UK and back takes nearly 13 hours including turnaround time on the ground at the destination which means fewer rotations than the airline would see flying between two European cities.
Denton adds even flying to closer European destinations such as Turkey to meet the package holiday demand will also require a reconfiguration of aircraft use due to the increased flight times.
And he says these changes will be further complicated by the airports EasyJet currently operates from.
“EasyJet are in some fairly congested airports already,” Denton says. “Gatwick or Edinburgh are important to EasyJet but they are already constrained from a capacity basis.”
He adds easyJet holidays will also need to start sourcing accommodation in some of the airline’s more popular destinations, many of which are European cities as opposed to coastal resorts, which should provide fresh opportunities for local hoteliers.
Denton says: “Airlines already have exclusive access to their seats and you can get beds from anywhere as there are not the same constraints.”
European growth
EasyJet holidays can also drive growth by launching the product to new markets, a strategy it is already being implemented having launched in France and Switzerland in 2023 before Germany was added at the beginning of 2024.
The airline also used its results announcement to tease this potential, saying: “Our multi-currency technology platform enables expansion into other source markets”.
While this is an obvious strategy for driving further growth, both Denton and Bowen agree that much work is required to make it successful.
Denton says: “They have got to replicate what they are doing in the UK in every source market they are in, but that is complicated and the worst thing you can do is run before you can walk as each market is unique.
“Some markets are very conservative and very nationally loyal; Danish travellers like to book with Danish holiday companies and the Swedes are the same.”
Bowen adds Scandinavian countries are unlikely to be on the initial list due to the additional time it takes to travel to the Mediterranean from the region.
He also argues that even knowing where EasyJet Europe’s 19 bases are located doesn’t help determine which market EasyJet holidays are targeting for its next launch.
Bowen says: “Milan-Malpensa is their biggest European base but while they know what the market is and where their customers are going, whether Italians use the airline for leisure or for business isn’t so clear.”
So it remains to be seen how the expansion of EasyJet holidays will unfold, but with the tour operator offering new opportunities for profit in comparison to a somewhat stagnant aviation market then it seems logical that Europe should prepare itself for a growing orange presence.
(Picture courtesy of ERIC SALARD/Flickr)