The UK leisure travel business Dart Group has seen a better than expected winter performance and strong demand for summer 2015. The UK economic recovery and the weak euro look set to support demand going forward. Margins will also strengthen if the fall in oil prices isn't offset by lower ticket prices.
Dart Group operates the budget airline Jet2.com and the package holiday business Jet2holidays. Together these form the Leisure Travel division which accounts for over 90% of Dart Group's operating profits. The Jet2holidays business has been growing rapidly and supports seat sales at Jet2.com. In the six months to September 2014 package holiday customers were a third of all passengers flown, up from 31% the year before.
Dart Group's budget airline: Jet2.com
Dart Group's package holiday business: Jet2holidays
The geographic focus of Dart Group is on the North of the UK with key airports Leeds Bradford, Manchester and Belfast. This makes Dart Group dependent on UK consumer confidence outside of the prosperous south of the country.
Dart Group's UK airports and some European destinations
Source: Jet2.com website
For the financial year to March 2015 Dart Group expects underlying operating profits to be ahead of current market expectations and in-line with last year. This is due to lower than anticipated winter losses at the group.
Looking to the 2015 summer season and as of 13th March over 50% of capacity was sold which is ahead of the same time last year. The positive trading update saw Dart Group's share price decisively break above the £3 level.
The trading update does, though, feel like a sense of Déjà vu because in April 2014 the company was also optimistic for the summer. However, in June 2014 Dart warned of weak demand which pushed the share price back below £2.
Reasons cited for the change included the World Cup, the weather and the lack of a financial recovery in the North of the UK. As such the load factor and net ticket yield both fell back in the half-year to September 2014 on the year before.
Dart Group in summer 2014 & 2013: How will 2015 stack up?
Source: Dart Group interim financial report 2014
In our view, leisure travel demand for summer 2015 is likely to be much stronger than in 2014. Clearly, we…
