The last few years have been torrid for Jet2 (LSE: JET2). The low-cost leisure airline saw its operations come to a halt due to the pandemic. And since the reopening of borders, Jet2 shares have struggled to gain any momentum.
The stock has further lagged this year as ongoing inflationary pressures have coupled with turmoil at airports to push down its price. So, does this fall mean I should be buying Jet2 shares?
The results
Earlier this week saw the release of its results for the year ending 31 March. There were a few positives to take away, such as the 211% jump in revenue year-on-year. Total passenger numbers also increased to just short of 5m, compared to just 1.32m last year. Meanwhile operating losses were also cut by 4%.
However, investors were largely drawn to the comments made by Jet2 boss Philip Meeson. Within the release, Meeson hit out at “woefully ill-prepared and poorly resourced” airports and suppliers, as delays and cancellations continue to plague the firm’s operations.
Covid restrictions seen earlier this year further impacted Jet2. As a result, the group reported losses of £388.8m for the period, up 5%. Thursday saw the share price fall over 10%.
Wider factors
My main concern with Jet2 is the troubles we’re seeing at hubs across the UK. The company scrapped further flight routes last month as issues such as staff shortages have placed immense pressure on the firm. Looking forward, Meeson stated how performance this year “very much depends on how quickly the broader aviation sector returns to some level of stability.” Jet2 is not alone in its struggles, as this week saw British Airways cancel a further 10,300 flights – 15% of its schedule – for this summer.
To add to this, inflation woes are also dampening the outlook for the travel sector. With rates reaching 9.1% for the UK in May, the months ahead may see consumers tighten their belts as they cut back on unnecessary spending. Earlier this year CEO Steve Heapy warned of increasing prices next summer. These two factors combined could see Jet2 suffer.
Rising fuel costs could also be an issue. the firm has done well to hedge the majority of its fuel for 2022. However, if prices continue to rise into next year, this could eat away at the firm’s bottom line.
Despite this, the business anticipates high demand in the future. And as a result, it has entered into an agreement with Airbus for up to 75 A321 neo aircraft, 60 of which are now confirmed orders. This shows Jet2 is clearly planning for the long run and has full confidence in its operations for the times ahead.
Would I buy?
It’s true that Jet2’s results showed some positive signs. But Meeson’s comments hint at the difficult period the business is set to face. I think the company will struggle to navigate the months ahead. And with inflation seemingly not slowing down, along with ongoing airport troubles, Jet2 shares will most likely take a hit. I won’t be buying any shares today.
