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Investing.com -- S&P Global Ratings has upgraded easyJet to ’BBB+’ from its previous rating, citing the airline’s robust operating performance, solid balance sheet, and excellent liquidity profile.
The rating agency expects high single-digit total group revenue growth for fiscal 2025, driven by strong performance in the Holidays business and sustained high load factors. Industry-wide capacity constraints continue to support high ticket prices despite ongoing pressure on consumer spending.
S&P anticipates adjusted EBITDA margins to remain broadly stable or slightly lower than last year’s 15.1% due to continued cost pressures, though the airline maintains good cost control. Profitability is expected to improve over the medium term as new, more efficient aircraft enter the fleet at an accelerated pace and the Holidays business continues to grow.
The rating agency forecasts lower oil prices and jet fuel costs compared to fiscal 2024, despite increasing carbon costs.
easyJet’s fleet renewal strategy, which involves replacing A319 aircraft with larger, more efficient A320neo and A321neo models, is expected to deliver significant cost and efficiency benefits. The A320neo will provide a 19% increase in seating capacity and an estimated 24% reduction in fuel burn per seat, while the A321neo will offer a 51% increase in seat capacity with an estimated 30% reduction in fuel burn per seat.
These improvements could translate into more than £3 in unit cost savings and boost EBITDA margins, according to S&P. Capital spending is forecast to increase to approximately £1.7 billion in fiscal 2026, £2.3 billion in fiscal 2027, and £3.3 billion in fiscal 2028.
S&P projects continued solid adjusted operating cash flow generation of £1.5 billion-£1.6 billion annually, though this will be lower than gross capital expenditure for several years, adding debt to easyJet’s balance sheet.
The stable outlook reflects S&P’s expectations that easyJet will continue to benefit from robust demand for air passenger travel and maintain strong yields over the next 24 months, despite higher capital expenditure and challenging macroeconomic conditions.
S&P notes it could lower its rating if easyJet’s adjusted ratio of funds from operations to debt falls significantly below 50%, while an upgrade is considered unlikely unless the airline materially increases its scale and scope of operations while maintaining adjusted funds from operations to debt well above 60%.
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