The easyjet share price looks attractive at 273p, but I’m concerned about its ability to keep flights full during 2022, as it brings capacity back to pre-pandemic levels.
Avoiding the airlines, I was curious to see whether there were other investment options to take advantage of the return of leisure travel. What about the airports and train stations themselves?
For anyone who has plucked up the courage in recent months to book an air ticket, don a mask and head off to warmer climes, it will have come as a shock to see what has happened to our busy airports.
The days of crowded bars, restaurants and lounges are a distant memory. It is more likely that travellers passing through the UK’s regional airports in recent months will have been greeted by vacant spaces, apologetic notices on the doors of closed food outlets, and small groups of passengers discreetly attempting to avoid each other.
My own recent experience at Gatwick was, however, a little more encouraging. Whilst the cavernous South Terminal remains as a mothballed shell, the buzz at the North Terminal was definitely more upbeat. This gave me some encouragement about the sector’s ability to recover its mojo by the time summer rolls around.
For me, an alternative option for exposure to the sector can be found through SSP Group (LSE: SSP), one of the leading worldwide operators of travel food concessions, to be found in multiple airports and railway stations across five continents.
In 2019 SSP was flying high, with its share price in excess of 600p and profits of over £200m. A year later, however, the company’s activities had been decimated by the unforeseen impact of Covid’s first wave.
Management have nevertheless shown resilience and utilised government support, in the form of furlough payments and emergency loans, to tide them through the worst of the pandemic. Negotiations with landlords and a successful rights issue in April 2021 allowed them to reduce leverage and re-position the business for the post-pandemic period.
A recent trading update — on 4th February — informed us that trading in the company’s main markets (UK, Europe and North America) had regained ground, to between 63% and 79% of 2019 levels. Nearly three quarters of its total outlets are now open again, and there are plans for new expansion. Some of these new opportunities are likely to be taking advantage of the failure of other operators over the past two years.
The company is projecting a return to 2019 trading levels by 2024 and I like the fact that its portfolio of brands is focused on the leisure (rather than business) traveller.
Whilst I don’t believe that shares will return quickly to their 2018/2019 levels – and there remains a risk that new coronavirus variants might emerge and delay the world from travelling freely again – I am confident that SSP has strong upside potential over the next 12 months.
