Early-retiring A319s Saves easyJet £250 Million

easyJet is accelerating the retirement of its 79 remaining Airbus A319ceos and will exit the last aircraft from the fleet by FY29. That is a year earlier than what the UK carrier said last November. The high fuel and maintenance costs of the older aircraft are key drivers behind the decision that easyJet announced today in its HY26 earnings presentation. The fleet includes 61 leased and 18 owned A319s, which made up 22 percent of easyJet’s fleet of 356 aircraft by the end of March. The number had already come down by three aircraft since March last year. Six additional A319s will be retired in FY28, with all aircraft having left by FY29. Retiring the A319s saves the airline £110 million in costs in FY27 and another £140 million in FY28, or £250 million in total in incremental annual cost savings. About half of that is savings on operational costs, and the other half is lower fuel costs. With an additional 90 larger A320neos and A321neos coming in this FY26 through FY28, the upgauge effect on capacity is four percent in FY27 and five percent in FY28. An A320neo offers 19 percent more seats than the A310ceo, an A321neo even 51 percent more, while productivity is up 16 and 28 percent respectively. This brings an improvement in unit costs per seat of over £3. easyJet has unfilled orders through FY34 for 125 A320neos and 134 A321neos, plus 100 purchase rights. Costs and revenues The accelerated retirement fits in the strategy to reduce costs and generate more revenues through digitalisation and asset-light initiatives, as easyJet maintains its target to get to a £1.0 billion medium-term profit before tax. This target is under pressure from the sharp increase in fuel costs, which will be fully visible in the HY2 results from April. In line with last month’s trading update, easyJet reported a £552 million headline loss for HY1 compared to £-394 million last year. Airline revenues grew by 10 percent to £3.4 billion, of which £2.4 billion was due to six percent passenger growth to 42 million and £1.1 billion from ancillaries. Yields were up three percent as sector lengths increased, and the airline benefited from currency tailwinds. This was offset by 13 percent higher costs to £4.0 billion, of which five percent in higher CASKs excluding fuel to £6.73. Factors were inflation, strategic investments and one-off items. [caption id="attachment_192333" align="aligncenter" width="762"] easyJet upgauging benefits[/caption] easyJet Holidays grew revenues by 30 percent to £519 million and customers by 22 percent to 1.3 million. This resulted in a headline profit before tax of £61 million, up 39 percent year-over-year. Germany is one of the growth markets that Holidays is targeting this year, while the unit will offer flight-plus-hotel deals in October this year. A new initiative to be launched in FY27 is easyJet’s own loyalty program. Net cash grew to £434 million and liquidity stood at £4.7 billion, giving easyJet a strong balance sheet with no debt maturities until March 2028. Capacity While Wizz Air CEO Jozsef Varadi said last month at the CAPA Airline Leader Summit that he was counting on his competitors to reduce capacity this summer to his own benefit, those competitors are having none of that. Ryanair said on Monday that it will uphold capacity, and so did easyJet today. The UK airline has trimmed summer capacity slightly by just 0.3 percent after a review in March by redeploying capacity that was planned for the Middle East (Tel Aviv) or by thinning out some high-frequency routes in April and May. Full-year capacity is still expected to grow by an average of three percent, with four percent in HY1, and two percent in HY2. “Our strategy is clear - through disciplined growth, accelerated upgauging, and continued expansion of easyJet holidays, we aim to bounce back from this year’s Middle East-related setbacks, and then further progress towards our medium-term financial targets and deliver attractive shareholder returns as the operating environment normalises“, CEO Kenton Jarvis said in the earnings release. HY2 headline CASKs ex fuel are guided to increase by low single digits. Fuel costs remain uncertain. easyJet is hedged at 72 percent at $726 per metric tonne and 53 percent for HY1 of FY27, which starts in October. “Short-term additional hedging has been temporarily suspended due to elevated near-term fuel prices. The forward fuel curve remains in backwardation, with management of additional forward hedging continuing as normal.” easyJet says it has been inevitable to raise minimum ticket fares to offset higher fuel costs. It also has all discretionary costs under review. On the positive side, demand remains strong. Bookings are close-in, but 79 percent of Q3 capacity (April-June) and 40 percent of Q4 (July-September) have been sold, or 58 percent on average. For HY1 FY27, easyJet expects moderated growth. The airline aims to be profitable in Q1, by tradition the weakest quarter of the year.

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