EasyJet to resume dividends after record fourth quarter

(Sharecast News) - Budget airline easyJet hailed record fourth-quarter profit on Thursday amid strong demand, as it said it plans to resume dividend payments and announced a deal with Airbus to expand its fleet. The company expects pre-tax profit for the fourth quarter of between £650m and £670m, with passenger growth of 8% year-on-year.

For the year to the end of September, pre-tax profit is set to be between £440m and £460m, with easyJet holidays seen delivering around £120m.

The airline announced a new shareholder returns policy beginning with FY23 and payable in early 2024, with a payout ratio of 10% of headline profit after tax. That's expected to rise to 20% in FY24.

It also set out new medium-term targets and said it plans to deliver more than £1bn in pre-tax profit, with pre-tax profit per seat of between £7 and £10.

In addition, easyJet said it has placed a firm order with Boeing for 157 aircraft for delivery between FY29 and FY34 and 100 purchase rights, subject to shareholder approval.

Chief executive Johan Lundgren said: "We have delivered a record summer with strong demand for easyJet's flights and holidays with customers choosing us for our network, value and service.

"This performance has demonstrated that our strategy is achieving results and so today we have set out an ambitious roadmap to serve more customers and deliver attractive shareholder returns, underpinned by a continued focus on costs and operational excellence.

"Our new medium-term targets provide the building blocks to deliver a PBT greater than £1 billion. This will be driven by reducing winter losses, upgauging our fleet and growing easyJet holidays. As part of our commitment to shareholder returns, the board intends to reinstate dividends commencing with the FY23 results."

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "EasyJet's put dividends back on the schedule as its recovery from the pandemic can finally be labelled mission complete. The level of the payout might be smaller than pre-pandemic, but this allows the group to ease back in and increases the chances of meaningful increases further down the line.

"The group's very much thinking future-first with a huge new order of aircraft on the table too, as it looks to secure supply early to allow its capacity and high-calibre route network to remain best-in-class. Grasping the nettle is something easyJet's very good at, allowing it to remain on the front foot. Of course, being gung-ho increases the risk of being stung but it's still a preferable method in the highly competitive world of short haul air travel. Further information's needed on how these planes will be funded, with less capital-intensive option of sale leasebacks potentially an option."