easyJet: Building Value Beyond Low Fares

easyJet is one of Europe’s largest low-cost airlines, offering affordable short-haul flights to popular leisure and city destinations across the continent. It combines low prices with a strong network at major airports, a well-known brand, and a growing number of loyal customers. After a challenging period for the airline industry, easyJet is now generating stronger profits and cash flow while running a more disciplined operation. The question is: Should easyJet be part of your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.

For full disclosure, I should mention that I do not own any shares in easyJet at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of easyJet, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

easyJet is a low-cost, European, point-to-point airline focused on short-haul travel across Europe. Its mission has remained largely unchanged for three decades: to make flying simple, affordable, and accessible to a broad customer base. The company operates a standardized low-cost model built around high aircraft utilization, a single-fleet Airbus A320 family, dense route scheduling, and unbundled fares that allow customers to pay only for what they value. The airline operates a large and diversified network, with more than 350 aircraft flying over 1.200 routes across nearly 40 countries and more than 160 airports. Unlike many ultra-low-cost carriers, easyJet places a strong emphasis on primary and slot-constrained airports in major European cities. This allows it to serve a mix of leisure, visiting friends and family, and short-haul business travelers, while maintaining competitive pricing relative to full-service airlines. easyJet’s core revenue is generated from passenger volumes and fare yields, supplemented by a growing stream of ancillary revenues such as baggage fees, seat selection, and in-flight services. These ancillary revenues are structurally important, as they enhance revenue per seat without materially increasing costs. In parallel, easyJet has built a fast-growing holiday packages division, easyJet Holidays, which bundles flights with hotels. This business leverages the airline’s brand, distribution, and customer base to capture a larger share of leisure travel spending and has become an increasingly meaningful contributor to growth and margins. The company places strong emphasis on digitalization and self-service. Its customer app covers the entire journey from booking to boarding, including disruption management tools that allow passengers to rebook or make changes without human intervention. This improves customer experience while lowering operational complexity and cost. easyJet’s competitive moat is built on a combination of structural network advantages, cost efficiency, brand strength, and customer loyalty rather than on any single differentiator. One of its most important moats is its strong position at primary, capacity-constrained airports such as London Gatwick, Paris Charles de Gaulle, and Amsterdam. In many of these airports, easyJet holds number one or number two market share positions. These slots are scarce, difficult to replicate, and highly valuable, as they attract higher-yield passengers and provide schedule convenience that ultra-low-cost competitors often cannot match. This creates a durable barrier to entry in key European markets. The company also benefits from scale and operational efficiency. A standardized fleet, high aircraft utilization, and a strong cost culture allow easyJet to maintain low unit costs while operating from more attractive airports than many peers. Growth through upgauging newer aircraft further supports declining unit costs over time. Long-term partnerships with airports and suppliers add stability and cost visibility. Brand and loyalty form another layer of competitive advantage. easyJet is one of the most recognized airline brands in Europe, and around 70% of seats are booked by returning customers. This level of repeat usage reflects trust in reliability, pricing, and service quality, and supports consistently high load factors and strong ancillary revenue uptake. Digital capabilities reinforce both cost efficiency and customer satisfaction. The app-based booking, check-in, and disruption management tools reduce friction for customers while lowering staffing and handling costs for the airline. This combination of convenience and self-service is difficult to replicate at scale without significant investment and operational discipline. Finally, easyJet Holidays adds a complementary moat. By bundling flights and hotels, easyJet deepens customer relationships, increases wallet share, and smooths earnings through a higher-margin, asset-light model. This creates differentiation versus pure flight-only competitors and strengthens loyalty by offering an integrated travel experience.

Management

​Kenton Jarvis serves as the CEO of easyJet, a role he assumed in January 2024 after a long career within the company and deep familiarity with its low cost DNA. His appointment marked a continuation of easyJet’s strategy and culture, reflecting a preference for internal leadership with strong operational and financial grounding. Before becoming CEO, Kenton Jarvis held several senior leadership roles at easyJet, most notably as CFO. In that position, he played a central role in navigating the airline through periods of significant industry disruption, with responsibility for cost discipline, balance sheet resilience, fleet planning, and capital allocation. This experience gave him an in depth understanding of the structural economics of a low cost airline operating in a highly competitive European market. As CEO, Kenton Jarvis has remained firmly committed to easyJet’s long standing mission of making low cost travel easy and accessible. He has consistently emphasized disciplined execution across the company’s four strategic pillars: building Europe’s best network, strengthening revenue, delivering ease and reliability, and driving the low cost model. A recurring theme in his leadership is the need to continuously challenge costs while selectively investing in areas that improve customer experience and long term competitiveness. Kenton Jarvis places strong emphasis on people and culture as strategic assets. easyJet and easyJet holidays have been recognized as top workplaces by Glassdoor and The Sunday Times for multiple consecutive years, accolades he has directly linked to employee engagement, frontline empowerment, and a service oriented culture. With more than 80% of employees interacting with customers daily, he views workforce engagement as a critical driver of reliability, operational performance, and brand loyalty. Under his leadership, easyJet continues to invest in digital tools and self service capabilities that simplify the customer journey while improving operational efficiency. In parallel, Kenton Jarvis has supported the expansion of easyJet Holidays as a complementary growth engine, leveraging the brand and network to capture a larger share of leisure travel spend without materially increasing risk. Kenton Jarvis is often described as pragmatic and data driven, with a leadership style closely aligned to easyJet’s low cost roots. He has repeatedly stressed the importance of never losing sight of the company’s founding principles while continuing to evolve the business model. Given his deep institutional knowledge, financial discipline, and focus on culture and execution, Kenton Jarvis appears well positioned to guide easyJet through its next phase as it seeks to become Europe’s most loved low fare airline.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. easyJet’s ROIC has historically been relatively low and volatile, which is largely a function of the airline industry rather than a sign of poor execution. Airlines are capital-intensive businesses with high fixed costs and large upfront investments in aircraft, while operating margins are structurally thin in normal conditions. Even in profitable years, a significant share of operating profit is absorbed by depreciation, fuel, airport charges, and labor, which naturally limits ROIC. This helps explain why easyJet’s ROIC in the years before the pandemic generally sat in the high single-digit to low double-digit range despite solid operating performance. The sharp decline in ROIC during 2020 and 2021 is almost entirely explained by the pandemic. Passenger demand collapsed, fleets were grounded, and revenues fell dramatically, while most of the capital base remained in place. In a business with high operating leverage, this led to negative returns on capital very quickly. These years are best viewed as an extraordinary external shock rather than a reflection of the underlying quality of easyJet’s business model. What matters most for investors is the clear improvement since 2022. As people started flying again, easyJet recovered faster than many competitors because it operates from major, slot-constrained airports where demand returns quickly and customers are generally willing to pay more. Planes became fuller, ticket prices moved back toward normal levels, and profits increased without the company needing to invest heavily in new assets. At the same time, easyJet has been running the business more efficiently. Aircraft are flying more hours per day, costs are being controlled more tightly, and the company is earning more per passenger through extras such as baggage, seat selection, and bundled offers. Together, these factors have allowed profitability and returns on capital to improve steadily. Management’s focus on ROCE supports the idea that easyJet’s returns are genuinely improving. ROCE and ROIC are calculated differently, but they both aim to show how efficiently the company uses its capital. easyJet has lifted ROCE from the low-teens to around 18%, which is in line with its medium-term target and clearly above its cost of capital. This did not happen by chance. It reflects higher operating profits, better profit per seat, and more careful decisions about where and how capital is deployed. The fact that ROCE is now used internally and even linked to employee bonuses suggests that generating healthy returns is becoming part of how the business is run day to day, not just a headline financial goal. Looking forward, returns can likely continue to improve, even though easyJet will never be a naturally high-return business like an asset-light software company. Profit per seat is still moving toward management’s long-term targets, easyJet Holidays is growing as a higher-margin business that requires relatively little additional capital, and ongoing investment in digital tools is making operations cheaper and smoother for customers. While new aircraft deliveries will increase the amount of capital tied up in the business, newer planes are more fuel-efficient and carry more passengers, which should help lower costs per seat over time and support returns if demand remains healthy.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders, like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. I don't have the growth rate from 2015 to 2016 as Finbox only provides data for the past ten years. easyJet’s equity has grown in most years over the past decade, but with some noticeable ups and downs. That is normal for an airline. Equity mainly grows when the company makes money and keeps those profits in the business, and it shrinks when losses occur. Because airlines are cyclical and have high fixed costs, equity rarely grows in a straight line. Before the pandemic, easyJet was consistently profitable, which allowed equity to build gradually over time. Even though competition was intense and margins were not high, the company generally earned enough to increase its equity. This explains the steady growth in equity in the years leading up to 2020. The sharp drop in equity in 2020 was caused by the pandemic. Travel demand collapsed almost overnight, planes were grounded, and easyJet generated large losses while most costs and assets remained in place. Those losses directly reduced equity. The strong rebound in 2021 may seem surprising, but it reflects balance sheet actions and the early recovery in travel demand, which helped stabilize the company and rebuild equity from a very low level. In 2022, equity declined again, showing that the recovery was not smooth. The industry faced operational disruptions, higher fuel and labor costs, and lingering inefficiencies, which limited profitability. Even so, the business was moving in the right direction. From 2023 onward, equity growth became much more consistent. easyJet returned to solid profitability as travel demand normalized, planes flew fuller, and pricing improved. At the same time, the company controlled costs better and earned more per passenger through ancillary services. These profits were retained in the business, which steadily increased equity. Equity reaching its highest level ever in fiscal year 2025 reflects this stronger operating performance combined with better capital discipline. easyJet is now generating returns above its cost of capital, growing higher-return activities like easyJet Holidays, and managing its assets more efficiently. In simple terms, the company is earning more money and keeping more of it, which naturally lifts equity.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. easyJet’s free cash flow has improved dramatically over the past three years, both in absolute terms and as a margin, and this shift is one of the clearest signs that the business is now operating from a much stronger footing than it was earlier in the decade. Historically, free cash flow for easyJet was modest and volatile. That is typical for airlines. Large upfront investments in aircraft, combined with cyclical demand and thin margins, mean that cash generation can fluctuate significantly from year to year. In weak periods, operating cash flow quickly disappears while capital spending remains high, which is exactly what happened during the pandemic. In 2020 and 2021, free cash flow and free cash flow margins turned sharply negative as revenues collapsed but fleet-related costs and commitments remained. What has changed since 2022 is both demand and execution. As travel demand normalized, operating cash flow recovered strongly. Planes flew fuller, pricing improved, and ancillary revenue per passenger increased. This lifted cash generated from operations much faster than costs. At the same time, easyJet became more disciplined in how it invests capital. Rather than chasing growth for its own sake, management focused on deploying capacity only where returns are highest and closing or shrinking bases that did not meet profitability requirements. That combination allowed free cash flow to rebound sharply. The past three years represent a clear shift in easyJet’s cash generation. Free cash flow is now much higher than it was in the past, and the business is converting a larger share of its revenue into cash. This is mainly because easyJet is earning more per flight, flying its aircraft more efficiently, and running a leaner and more flexible cost base. Crucially, this improvement did not come from simply spending more money. Although capital spending has increased again as new aircraft are delivered, the cash generated from day-to-day operations has grown even faster. That gap between operating cash flow and investment spending is what has allowed free cash flow to rise to a new level. Another important factor is fleet renewal. easyJet is phasing out older aircraft and replacing them with newer planes that carry more passengers and use less fuel. Although buying new aircraft increases spending in the short term, these planes are cheaper to operate over their lifetime because they burn less fuel and require less maintenance. Over time, this improves the economics of the business. Management estimates that once the fleet reaches a steady state, the number of new aircraft needed each year will require less cash than the company already generates from its normal operations. That means easyJet should be able to maintain and renew its fleet while still producing solid free cash flow across the cycle. easyJet uses its free cash flow in a careful and structured way. The main priority is investing in the fleet, with the focus on replacing older aircraft rather than expanding capacity too aggressively. Management has been clear that growth will stay controlled and flexible, so the airline can slow down if market conditions weaken. Another key priority is making sure aircraft are used where they earn the best returns. easyJet actively shifts capacity toward its most profitable bases and is willing to close routes or bases that do not meet return requirements. This helps protect both cash generation and profitability. Beyond the fleet, free cash flow is also invested in areas that are expected to improve the business over time. This includes bringing more maintenance work in-house, such as the purchase of a maintenance facility in Malta, which should lower costs and improve reliability. The company also continues to invest in digital systems and in easyJet Holidays, both of which are intended to improve efficiency, strengthen customer relationships, and support higher margins. As free cash flow has become more stable, easyJet has been able to restart regular shareholder returns through dividends, while still keeping flexibility to adjust capital allocation depending on market conditions and investment needs. Looking ahead, free cash flow will not increase every single year in a straight line, as the airline industry remains cyclical. That said, the stronger cash generation of the past three years is not just a short-term rebound. It reflects a business that is earning more per seat, controlling costs better, allocating capital more carefully, and operating a more efficient fleet. If this discipline continues and demand remains broadly healthy, free cash flow should stay well above pre-pandemic levels over the long term, even with normal ups and downs along the way. The free cash flow yield suggests that the shares may be trading at an attractive level, although valuation will be discussed in more detail later in the analysis.

Debt

Another important aspect to consider is debt. It is crucial to evaluate whether a business maintains a manageable debt level that can be repaid within three years, typically assessed by dividing total long-term debt by earnings. An analysis of easyJet’s financials shows that the company currently has debt equivalent to 3,84 years of earnings, which is slightly above the three-year threshold. That said, this number alone does not tell the full story. easyJet’s financial position has improved a lot in recent years. In fiscal year 2025, the company increased its net cash position to around GBP 600 million, even while continuing to buy aircraft and pay down debt. By year end, easyJet held about GBP 3,5 billion in cash. This large cash balance acts as a safety cushion and lowers the risk that debt becomes a problem. easyJet is also owning more of its aircraft instead of leasing them. The value of aircraft owned by the company rose to GBP 4,8 billion in 2025 and is expected to keep rising as newer planes are added to the fleet. Owning more aircraft gives easyJet more flexibility, lowers long-term costs, and makes the balance sheet stronger. On top of that, easyJet holds more cash than it needs for normal daily operations. This extra liquidity means the company can pay for future aircraft deliveries without putting pressure on its finances or needing to borrow heavily. In simple terms, it gives easyJet room to invest while staying financially safe. Finally, easyJet has an investment-grade credit rating, which is a sign that independent rating agencies view its finances as strong and reliable.

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Risks

Macroeconomics and geopolitics is a risk for easyJet because air travel is highly sensitive to economic conditions, consumer confidence, and global stability, all of which are largely outside the company’s control. When the economic environment weakens, people tend to cut back on discretionary spending, and travel is often one of the first things to be reconsidered. In 2025, economic growth in the UK and Europe has been modest, with GDP growth around 1%, while inflation and higher interest rates have increased pressure on household budgets. Consumer surveys still show a desire to travel, but rising costs are becoming a more important factor in decision-making, particularly for lower-income customers. This can limit easyJet’s ability to raise ticket prices, even as its own costs, such as fuel, labor, and airport charges, remain elevated. Geopolitical events add another layer of uncertainty. Ongoing wars in Ukraine and the Middle East have directly affected easyJet’s route network. The airline has suspended flights to destinations such as Tel Aviv and Jordan, removing profitable winter routes from its schedule. As a result, capacity has been redirected by many airlines into alternative leisure destinations like the Canary Islands and parts of mainland Spain. This concentration increases competition in those markets and can put pressure on fares and margins, even if overall demand remains healthy. These conflicts also create indirect risks. Geopolitical instability tends to increase volatility in fuel prices, currencies, and financial markets. For an airline, sudden movements in jet fuel costs or exchange rates can have a meaningful impact on profitability, especially if they occur faster than fares can be adjusted. There is also operational risk. Geopolitical events can lead to airspace restrictions, sudden route changes, or safety-related suspensions, which disrupt schedules and reduce efficiency. Even temporary disruptions can hurt profitability in a business with high fixed costs, where aircraft and crews need to be kept productive to generate returns. Finally, prolonged economic weakness or escalating geopolitical tensions could affect easyJet’s financial position more broadly. Weaker demand combined with higher costs could reduce cash generation, while market volatility could affect access to financing or credit ratings. Although easyJet currently has a strong balance sheet and liquidity position, sustained external shocks would still represent a risk to earnings stability and share price performance.

Regulation is a risk for easyJet because the airline operates in a highly regulated industry where rules are becoming more complex, more expensive, and more intrusive, often with little notice. As a low-cost airline, easyJet’s business model depends on efficiency, pricing flexibility, and lean operations. Regulatory changes can directly undermine those advantages. One clear example is how regulatory approvals can delay or disrupt operations. In 2025, easyJet incurred around GBP 20 million in additional costs because European Commission approval for certain remedies and new routes came later than expected. That delay meant the airline was late to market, reducing revenue potential during the peak summer season. Even when outcomes are ultimately positive, slow or unpredictable regulatory processes can materially affect profitability. Environmental regulation is another growing risk. Governments and the European Union are increasing taxes and charges on air travel, often applied on a per-passenger basis. These flat fees disproportionately hurt low-cost airlines because they make up a larger share of a cheap ticket than an expensive one. In countries such as Italy, the Netherlands, and Belgium, higher aviation taxes have already made flights harder to sell at low prices, directly pressuring demand and margins. Climate-related rules are also pushing costs higher. Under the EU’s Fit for 55 package, free carbon credits under the Emissions Trading System are being phased out, and airlines are being required to use increasing amounts of sustainable aviation fuel. While the long-term environmental goals are clear, sustainable fuel is significantly more expensive than conventional jet fuel and is still in limited supply. This creates a risk that costs rise faster than airlines can pass them on to customers, especially in a price-sensitive market like short-haul travel. Regulation is also increasingly affecting how airlines price and operate their services. In Spain, authorities have sought to force airlines to include cabin bags for free, challenging the unbundled pricing model that underpins low-cost aviation. easyJet is appealing fines related to this issue, but the broader risk is that governments intervene in commercial decisions, limiting pricing flexibility and increasing costs. In France, rules banning certain short domestic flights in favor of rail travel have already reduced route options, and similar political pressure could spread to other markets. Passenger protection rules add another layer of risk. EU regulations require airlines to compensate passengers for delays and cancellations, and recent court rulings have narrowed what qualifies as “extraordinary circumstances.” This means airlines may now have to pay compensation in more situations, including staff shortages or technical issues. For an airline operating a large number of short-haul flights every day, this raises the risk of unexpected costs and operational complexity.

Delivery delays on planes are a risk for easyJet because the airline’s business model and long-term strategy depend heavily on receiving new aircraft on time. As a low-cost airline, easyJet relies on a steady flow of new, fuel-efficient planes to grow capacity, lower costs, and improve returns. When deliveries are delayed, these benefits are pushed back, while many costs remain in place. Across Europe, short-haul capacity growth is already constrained. Both major aircraft manufacturers are effectively sold out for many years, and ongoing production and supply chain issues have made delivery schedules less reliable. For easyJet, this means there is limited ability to replace delayed aircraft with alternative orders, as additional planes simply are not available at short notice. Delays affect growth first. easyJet plans its network, routes, and base openings years in advance based on expected aircraft deliveries. If planes arrive later than planned, the airline may not be able to launch new routes, increase frequencies, or enter new markets on schedule. This can lead to missed revenue opportunities, particularly in peak travel seasons when demand is strongest. There is also a direct cost impact. New aircraft are more fuel-efficient and have lower maintenance requirements than older planes. When deliveries are delayed, easyJet must keep older aircraft in service for longer or rely more on leased aircraft. This increases fuel burn, maintenance costs, and leasing expenses, which puts pressure on margins. The airline also loses the benefit of higher-capacity aircraft that allow more passengers to be carried per flight. Operational complexity increases as well. Managing a mixed fleet for longer than planned makes scheduling, maintenance, and crew planning more difficult. In a tightly run low-cost model, even small inefficiencies can have a meaningful impact on costs and reliability. Delays can also limit easyJet’s ability to retire less efficient aircraft on time, slowing progress toward its cost and sustainability targets. Finally, prolonged delivery delays can affect returns on capital. easyJet commits capital and planning resources based on expected aircraft arrivals. When deliveries slip, capital is tied up longer without generating returns, and the timing of cost savings and revenue growth is pushed out. Over time, this can weigh on free cash flow and return metrics, even if demand remains strong.

Reasons to invest

Winning customers is a reason to invest in easyJet because the company is not just filling seats through low prices, but is increasingly building loyalty, improving reliability, and strengthening its brand in a highly competitive market. In an industry where customers have many choices and switching costs are low, consistently winning repeat customers is a strong indicator of long-term competitiveness. easyJet continues to attract customers because it combines attractive fares with a broad network of popular destinations and a service proposition that is improving year after year. Demand across its primary airport network remains healthy, with passenger numbers rising and load factors close to 90%. This shows that customers are not only booking flights but are consistently choosing easyJet over alternatives, even as competition remains intense. A key driver behind this is the improvement in the customer experience. easyJet has invested heavily in operational resilience, people, and technology, which has led to measurable gains. On-time performance has improved by three percentage points, turn times have shortened, and disruption is being handled more smoothly. These operational improvements matter because reliability is one of the most important factors influencing whether customers choose the same airline again. Customer satisfaction reflects this progress. easyJet’s customer satisfaction score has risen to 80%, the highest level in more than a decade. This improvement is not limited to one part of the journey but spans booking, airport experience, boarding, in-flight service, and how disruptions are handled. Investments in frontline staff and digital tools, such as the app and self-service disruption management, mean that most customers can now resolve issues quickly without frustration. Around 78% of customers self-serve during disruption, which improves the experience while keeping costs under control. The result is clear in customer behavior. Around 71% of bookings are made by returning customers, and repeat booking rates continue to improve. This level of loyalty is unusually high for a low-cost airline and suggests that easyJet is moving beyond being a purely price-driven choice. Strong repeat usage also supports more stable demand, better load factors, and higher ancillary revenue per passenger. Importantly, customer wins are reinforcing themselves. Better service and reliability improve satisfaction, which drives loyalty and repeat bookings. Higher repeat usage improves load factors and profitability, allowing easyJet to reinvest in people, technology, and operations. This creates a virtuous circle that supports both growth and returns.

Capacity and network expansion is a reason to invest in easyJet because growth is being pursued in a disciplined, targeted way that strengthens the network, improves efficiency, and supports higher long-term profitability rather than simply adding seats for the sake of scale. Demand for travel across Europe remains strong, with more than 100 million easyJet seats flown annually, and easyJet is well positioned to capture this demand. The expansion of the network is carefully balanced. Around 55% of capacity is now directed toward leisure destinations, which continue to see strong demand, particularly in winter, while 45% remains focused on city and domestic routes. City flying is gradually returning toward pre-pandemic levels, supporting higher-yield traffic,  while domestic capacity has been reduced where returns were weaker. This constant rebalancing allows easyJet to grow where profits are strongest and pull back where returns do not justify the capital deployed. Opening and closing bases is another sign of discipline. In 2025, easyJet opened new bases at London Southend, Milan Linate, and Rome Fiumicino, while closing underperforming bases in Venice and Toulouse. New bases are chosen for strategic reasons, often in slot-constrained airports where long-term returns can be attractive, even if they take time to mature. Southend, for example, performed in line with network averages in its first summer, supported by strong demand from easyJet Holidays. Linate and Fiumicino are investments that come with short-term complexity, but management expects them to mature into high-quality, high-return assets similar to other successful city airports in the network. Looking ahead, network expansion continues in a measured way. New bases in Newcastle and Marrakesh are planned for summer 2026, with early booking trends already encouraging. Marrakesh, in particular, is an example of smart expansion, as it is already a popular destination in easyJet’s network but will now benefit from based aircraft, improving efficiency and customer choice. Fleet growth underpins this expansion, but again with a focus on efficiency rather than sheer size. easyJet has a large and visible order book stretching to 2034, providing long-term growth options. Aircraft deliveries are expected to accelerate from 17 in 2026 to 30 in 2027 and 43 in 2028. These new aircraft support “upgauging,” replacing smaller, older planes with larger, more fuel-efficient models. This increases seats per aircraft, lowers costs per seat, and improves margins without requiring a proportional increase in flights. Importantly, much of the financial benefit from this upgauging still lies ahead. Only a small part of the expected cost savings has been realized so far, meaning there is significant runway for future margin improvement as older aircraft are retired and newer ones make up a larger share of the fleet.

easyJet holidays is a reason to invest in easyJet because it has become one of the group’s most powerful and reliable growth engines, adding high-margin earnings without requiring heavy capital investment. Since launching in 2019, the business has moved from being a complementary offering to a core driver of profitability, now contributing a meaningful share of group profits. The key attraction of easyJet holidays is its asset-light business model. Unlike traditional tour operators, it does not commit capital to hotel inventory or own physical assets. Instead, it combines easyJet’s flights with hotel partnerships on a flexible, cost-plus basis. This keeps fixed costs very low and makes the business highly scalable. In practice, this means that as volumes grow, profits grow even faster, which was clearly demonstrated in 2025 when a 20% increase in customers translated into a 32% increase in profit. That operating leverage is one reason easyJet holidays reached its original profit target of GBP 250 million two years earlier than planned. Management’s decision to upgrade the target to GBP 450 million by 2030 reflects both strong execution and confidence that the growth runway is far from exhausted. Importantly, this growth is not dependent on aggressive pricing. In 2025, the business improved margins from 12% to 13% while still growing volumes, showing pricing discipline even in a competitive market. easyJet holidays also benefits directly from the airline’s network expansion. When easyJet launches new routes or adds capacity, the airline must wait for those routes to mature. easyJet holidays, however, can immediately sell package holidays into that new capacity, particularly on leisure and regional routes. This allows the group to monetize new seats faster and improves overall returns on capacity growth, especially during off-peak periods such as winter. Customer behavior strongly supports the investment case. More travelers are choosing easyJet holidays as their package provider, not only from the airline’s existing customer base but increasingly from competitors. In the UK, market share has doubled from 5% to 10% in just two years, and attachment rates continue to rise. Customer satisfaction is high, with strong intent to rebook, reinforcing long-term brand value and repeat demand. There is also substantial room for further growth. Attachment rates on leisure flights remain relatively low, city breaks are still a smaller part of the mix, and international revenues outside the UK are limited. Expansion into European source markets such as Germany, Switzerland, and France represents a significant opportunity. Germany alone is a larger package holiday market than the UK, and early signs from European expansion are encouraging. New distribution strategies, such as working with travel agents in markets where direct online sales are less dominant, could further accelerate growth. The product range is also expanding. easyJet holidays now offers more than 8.000 hotels across over 120 destinations, including all-inclusive, family, city, and luxury options. The recently launched luxury collection, with high average booking values, shows that the brand can move into higher-margin segments without diluting its value proposition. Crucially, easyJet holidays improves the quality of group earnings. It is less capital-intensive than the airline, highly cash-generative, and less exposed to short-term volatility in fuel costs or aircraft utilization. As the business grows, it helps smooth earnings across the cycle and strengthens free cash flow.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 0,65, which is from the fiscal year 2025. I have selected a projected future EPS growth rate of 11%. Finbox expects EPS to grow by 11,6% over the next five years. Additionally, I have selected a projected future P/E ratio of 22, which is double the growth rate. This decision is based on easyJet's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be £10,04. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy easyJet at a price of £5,02 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 1.716, and capital expenditures were 912. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 638 in our calculations. The tax provision was 164. We have 750,9 outstanding shares. Hence, the calculation will be as follows: (1.716 – 638 + 164) / 750,9 x 10 = £16,54 in Ten Cap price. 

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Ashtead's Free Cash Flow Per Share at £1,07 and a growth rate of 11%, if you want to recoup your investment in 8 years, the Payback Time price is £14,09.

Conclusion

I believe easyJet is an intriguing company with great management. It has built a strong competitive moat through a combination of structural network advantages, cost efficiency, brand strength, and customer loyalty. Due to the business that easyJet operates in, ROIC will never be high, but it is encouraging that it has been growing every year over the past three years. Free cash flow and free cash flow margins have reached a new high in the past three years, and while further growth is expected over time, it will likely remain volatile due to the cyclical nature of the airline industry. Macroeconomics and geopolitics are a risk for easyJet because air travel is highly sensitive to economic conditions, consumer confidence, and global stability, all of which are outside the company’s control. Weak economic growth, inflation, higher interest rates, and ongoing geopolitical conflicts can reduce demand, limit pricing power, disrupt routes, and increase cost volatility. Regulation is also a risk for easyJet, as increasing environmental rules, aviation taxes, passenger compensation requirements, and government intervention can raise costs, restrict pricing flexibility, and disrupt operations in a business model that relies on efficiency and low fares. Aircraft delivery delays represent another risk, since easyJet’s growth plans, cost improvements, and fleet renewal depend on receiving new aircraft on time, and delays can lead to higher operating costs, missed growth opportunities, and postponed efficiency gains. Winning customers remains a key strength, with rising customer satisfaction and reliability translating into high repeat booking rates of around 71%, supporting stable demand, strong load factors, and higher revenue per passenger. Capacity and network expansion continues to be a positive driver, as growth is disciplined and focused on higher-return routes, slot-constrained airports, and more efficient aircraft rather than pure volume. easyJet holidays is another important positive, as it is a fast-growing, high-margin, asset-light business that improves the group’s earnings quality and cash generation, with a clear path toward GBP 450 million in profit by 2030. While there are many things to like about easyJet, I personally prefer to be invested in less cyclical sectors, so I will not be investing in easyJet at this time.

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