On Friday, Deutsche Bank (ETR:DBKGn) reiterated its Buy rating on Jet2 plc (JET2:LN) (OTC: DRTGF) with a steady price target of GBP22.40. The firm's analysis highlighted Jet2's resilience compared to its peers in the current market environment, noting a 6% decrease in the company's share price over the past month. This performance stands in contrast to competitors such as Ryanair (NASDAQ:RYAAY) and EasyJet, which have seen their shares drop by approximately 12%, a trend attributed to Ryanair's recent forecast of a weaker yield outlook for the upcoming summer season.
Jet2's business model, which focuses on package holidays rather than individual flight sales, is seen as a stabilizing factor. Approximately 70% of Jet2's seats are sold as part of package holidays, which Deutsche Bank suggests could lower earnings risk in the event of softer flight yields. The firm also pointed out that package holidays are typically booked six months in advance, compared to the six-week booking window for low-cost carriers.
Additionally, the cost structure of package holidays may contribute to Jet2's stability. The flight component is estimated to represent only 25% of the total cost of a package holiday, potentially making customers less sensitive to changes in flight pricing. This aspect of Jet2's business is particularly relevant for the summer season, where only around 25% of seats are sold as flight-only options, compared to nearly 35% during the winter months.
Deutsche Bank's analysis suggests that Jet2's model provides a degree of insulation from the yield pressures affecting low-cost carriers. The company's emphasis on package holidays, earlier booking curve, and the relative obscurity of flight prices within holiday packages are factors that could mitigate risks associated with fluctuating flight costs, especially in the lead-up to the summer travel season.
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