Skift Take

Jet2 has big ambitions for its leisure travel division and Brexit, plus other factors, have the potential to derail things. It makes planning for the future very difficult.

With profit and revenue both rising at a considerable rate, it would seem all is well at leisure travel operator Jet2 but the looming uncertainty of Brexit continues to hang over the company, as it does the rest of the industry.

The UK’s departure from the European Union isn’t the only problem facing the travel industry. Dart Group, Jet2’s parent company, included a long list of cost pressures in its first-half market update. They include: rising fuel prices, product innovation and employment issues. All of which threaten its expansion plans.

Jet2 is effectively two businesses — an airline and a package holiday operator — and over the last few years it has grown aggressively outside its heartland in the north of England.

Revenue in the leisure travel division hit $2.8 billion (£2.2 billion) in the six months up until the end of September – a rise of 38 percent. Operating profit increased 69 percent to $445 million (£347.8 million.)

Jet2holidays took 2.31 million customers on package holiday in the period, up 28 percent on the prior year. The figure represented 51 percent of overall flown customers. The average price of a package holiday climbed 7 percent to $880 (£689.)

Leisure travel makes up 96 percent of parent company Dart Group’s total revenue with the rest coming from a small distribution and logistics business.

The company expects “significant cost pressures” to appear on the horizon, adding that “the overall uncertain UK economic outlook particularly related to Brexit and how it may impact on consumer spending, means we remain unclear how demand will develop in the medium term.”

Brexit Downer

On Wednesday, the European Union and the UK agreed a withdrawal deal, which in theory would let the UK Leave the EU next March in an orderly fashion – rather than crashing out with no deal.

The problem for Prime Minister Theresa May is that she has to get the agreement through parliament, something that seems almost impossible given the Conservative Party’s small majority and the fact that many politicians have expressed their dislike of the deal.

Businesses like Jet2 will continue to face uncertainty until both sides formerly rubber stamp an exit deal. Travel companies in particular are worried about flights and the potential for disruption. There is also the general concern about how a Brexit-inspired economic downturn might impact consumer spending on items such as holidays.

“Our strategy for the long term remains consistent – to grow both our flight-only and package holiday products. On the assumption that the UK Government secures a pragmatic and balanced Brexit agreement with the EU, the outlook remains bright and we continue to have confidence in the resilience of both our Leisure Travel and Distribution & Logistics businesses,” Dart Group said.

Despite, the overall optimism of the company, Canaccord Genuity, which serves as the company’s corporate broker, decided to reduce its profit forecasts for 2019/20 and 2020/21.

“Fuel costs, as well as various other operating costs, are expected to rise while ongoing uncertainties regarding the UK economy, Brexit and the competitive environment may adversely impact passenger yields and package holiday prices,” it said.


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Tags: brexit, earnings, europe, jet2, tour operators, uk

Photo credit: An aircraft with Jet2holidays livery. Parent company Dart Group has reported a steep wise in profit but warned of headwinds to come. Alan Wilson / Flickr

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