Jet2 Shares Plunge as Profit Margins Could ‘Come Under Some Pressure’

Jet2 (LON: JET2) shares fell sharply Wednesday after warning profit margins may face pressure in the year ahead due to cost headwinds and a later booking profile.

The airline’s stock is currently down over 10%, trading at 1,406p a share.

Tne company expects profit growth of 8%-10% for the financial year ending March 2025 (coming in at £560m and £570m). However, CEO Steve Heapy cautioned that macroeconomic conditions and rising costs could impact margins in the upcoming year. 

He noted that while early bookings for Summer 2025 were satisfactory, they remain aware of pressures on consumer discretionary spending.

Winter 2024/25 on sale capacity is expected to be at 5.1m seats, 14% higher than Winter 2023/24.

The carrier faces inflationary pressures above the headline CPI rate, particularly in hotel accommodation, aircraft maintenance, and airport fees. 

Additionally, Jet2 said new government regulations will increase costs, including a £25 million rise in wage expenses due to changes in National Living Wage and Employer National Insurance contributions. 

“Like many businesses, we are facing other material cost increases imposed by recent fiscal announcements and Government regulation. The largest of these is the expected increase in wage costs driven by a combination of: increases to the National Living Wage, which ripples through to several pay levels as we maintain appropriate wage differentials,” said the company.

The mandated 2% Sustainable Aviation Fuel (SAF) mix is also expected to add £20 million in incremental costs.

Meanwhile, Jet2 believes operational challenges could further weigh on profitability. The company expects delays in the delivery of 14 new Airbus A321neo aircraft. This will lead to additional costs to cover aircraft shortages during peak summer.

Jet2 remains optimistic about long-term growth, expanding operations with new bases at Bournemouth and London Luton. However, the company admitted these bases are likely to be modestly loss-making in their first year.