EasyJet’s latest financial results highlight the significant impact of EasyJet Holidays’ rapid growth on the profitability of its PLC parent.

This initiative has been spearheaded by CEO Johan Lundgren, who, with his extensive experience leading TUI Holidays, fully recognises the profit potential within the holiday sector. The momentum will continue under the leadership of Kenton Jarvis, the incoming CEO as of January 2025, with whom I had the privilege of working closely during our time at Airtours PLC.

Holiday division profits rose by 59% to £190m, contributing nearly a third of the company’s pre-tax profits, driven by a 36% passenger increase to 2.6m. With EasyJet forecasting 25% growth in 2025 due to strong early sales, profit growth is expected to continue, reflected in the 23.84% share price surge over the past year, with analysts projecting over 20% growth for 2025

With only 5.8% of its 89.6m flight seats sold as package holidays, the holiday division has a significant opportunity for expansion.

Easyjet Holidays is significantly smaller than Jet2 Holidays, which increased carrying 15% to 6.08 million passengers last year. However, with 68.3% of Jet2’s flight seats sold as package holidays, EasyJet Holidays is poised for faster growth and will likely surpass Jet2 and TUI volumes to become the UK’s largest tour operator within five years.

However, this rapid volume growth may make too many holiday packages available in the UK market. We began to see signs of this in Sept and October, with substantial discounting needed to clear excess stock.

This is undoubtedly positive news for UK travel agents, as trade distribution remains cost-effective and drives more ‘swing’ sales than other channels, suggesting higher commissions are likely in the coming years.

City investors appear to view major OTAs ‘On the Beach’ and ‘Love Holidays’ as potential losers, with Jet2 allocating more flight seats to internal holiday packages and EasyJet’s API fees rendering holidays based on these flights uncompetitive. This likely explains On the Beach’s remarkably low market capitalisation of £281m, resulting in a 4.8 EV/EBITDA ratio, positioning it as a relative bargain for a strategic buyer.

Which brings us nicely to the Ryanair Question?  How can they possibly continue to ignore the holiday profit opportunity in the face of EasyJets results?

Ryanair has already completed a 360-degree reversal, deciding to work closely with the major OTA’s and broader travel trade after years of hostility, so why not go the whole hog and buy a ready-made tour operating division in the form of On the Beach?

At the same time, why not purchase Love Holidays from its current VC backers, who are openly looking for a sale?

The last time I saw a market environment like this was just before the four major tour operators, Thomson’s, Airtours, Thomas Cook and First Choice, all consolidated.

The pressure on Ryanair to embrace the packaging revolution will intensify with each EasyJet announcement, so watch this space.