Jet2 (JET2:AIM) 883.2p 

Loss to date: 7.7%

We always knew Jet2 (JET2:AIM) faced some hefty challenges this year, and we got that spot on. The demand surge we predicted if Europe avoided the possibility of an extended Covid recovery hangover has also come good.

So strong has the rebound been for low-cost holidays in the sun that already jammed supply chains have stayed congested.

Throw in soaring jet fuel prices from an energy crisis in the wake of Russia’s invasion of Ukraine, and that UK airports would struggle to get staff thanks to incredibly poor planning has complicated matters further.

WHAT’S HAPPENED SINCE WE SAID TO BUY?

These are problems that have largely been out of Jet2’s control. Where it has had influence is in how it has dealt with these issues. Where rivals chose to cut flights this summer, many at the last minute, Jet2 has not. Where others have axed holidays altogether, Jet2 committed to not failing its customers and bearing additional costs itself.

While investors have seen the share price drift lower in recent months as these factors impact financial performance and profit guidance, the pay-off longer term is in cementing its already best-in-class reputation for service. Analysts at Canaccord Genuity already estimate that Jet2 overtook TUI (TUI) as UK number one.

WHAT SHOULD INVESTORS DO NEXT?

We expect this to mean an even larger army of holidaymakers picking Jet2 in the future. With seat capacity expansion slowing into the winter season, Jet2’s pricing should remain firm, notwithstanding the current cost of living pressures on consumers.

The worst of industry disruption seems to be over and as risks lessen so the threat to existing forecasts reduces. Canaccord’s remains confident in its pre-tax profit forecast of £293.5 million this year to 31 March 2023. This implies a price to earnings of about eight, illustrating the scale of negatives already being priced in.

A bit of positive news in the coming months, particularly around summer 2023 bookings could, we suspect, trigger a significant re-rating of the shares and we urge investors to stick with this recovery story.

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