Jet2: A high-flyer in post-pandemic travel

Jet2 (JET2), the UK’s largest package holiday provider, is soaring high in a post-pandemic world where cost certainty and convenience are paramount for traveller’s.

The business has a rock-solid financial footing and an impressive track record of delivering profitable growth. The shares trade on an eye-catching forward valuation and we believe Jet2 offer quality and growth in equal measure.  

Seamless travel experiences: Jet2’s end-to-end package holidays

Jet2’s business model revolves around offering end-to-end package holidays, providing customers with a seamless solution that encompasses flights, accommodations, and more. In a world where traveller’s increasingly seek assurance of cost certainty and convenience, Jet2’s approach resonates powerfully.

Cost certainty: In an age where the cost-of-living crisis has made budget-conscious travellers the norm, Jet2 Holidays stands out with its commitment to cost certainty. By offering fixed, all-inclusive prices for its package holidays, the company enables customers to know precisely what they will pay upfront, eliminating any unpleasant surprises during or after their travels.

Recent trends underline the appeal of Jet2 Holidays’ business model, with 73% of Jet2’s departing passengers opting for a package holiday this summer, representing a 5% increase from the previous year. This shift in consumer preferences amidst the cost-of-living crisis demonstrates Jet2’s strong position in the market.

Navigating the flight path for growth

In Jet2’s full year results, it outlined four key areas which would form the basis of its growth strategy moving forward:

1. Sustainable aviation: Jet2 recognises the pressing need for sustainability in the aviation industry and is making strategic investments in sustainable aviation fuel (SAF). With an equity investment in a new SAF production plant, Jet2 anticipates commencing SAF production by 2027, demonstrating its commitment to environmentally responsible travel.
2. New aircraft orders: The company is committed to expanding its fleet with a focus on more sustainable and efficient aircraft. The agreement with Airbus to purchase 35 new firm-ordered Airbus A321/A320neo aircraft, with the potential to extend up to 146 aircraft, underscores its commitment to reducing its carbon footprint and enhancing operational efficiency.
3. Investment in training and facilities: Jet2 has invested in a new Airbus A321 flight simulator and training centre, strengthening its workforce’s capabilities. This supports the company’s growth ambitions by ensuring a highly skilled team.
4. Geographic expansion: Jet2 continues to explore opportunities for geographic expansion. Its recent launch of flights and holidays from Liverpool John Lennon Airport, its eleventh UK base, aligns with its long-term strategy for sustainable growth.

Profitability soars on revenue growth and falling costs

Jet2 not only weathered the storm of the COVID-19 pandemic but has emerged stronger and more resilient.

Another indicator of its robust financial health is the 17% growth in adjusted earnings (EBITDA), with Jet2 Holidays reporting an EBITDA of £581.8 million in 2023, compared to a negative EBITDA of £164.5 million in 2022.

And unlike many other travel stocks, Jet2’s balance sheet has not been saddled with mountains of debt. The business has a strong net cash position of £2.6bn (FY23) which is a key advantage when it comes to navigating crisis and ramping up growth.

Valuation worth noting

One of the standout qualities of Jet2 is its attractive valuation, making it a compelling choice for investors…

Additionally, Jet2 shines across several value metrics. The Price to Free Cash Flow ratio stands at 2.8, underscoring the company’s robust financial position. Furthermore, the EV (Enterprise Value) to EBITDA ratio is a sound 1.56.

These metrics confirm that Jet2 offers an enticing combination of quality and growth without the need for investors to break the bank. In other words, you’re getting a good deal on a stock that has a lot to offer.