Jet2 (JET2.L) – Equity Research Initiation
Jet2 is the UK’s largest tour operator and one of the country’s largest leisure airlines. The group combines Jet2.com, its airline operation, with Jet2holidays, its package holiday business, creating a model that sits between airline, tour operator and direct-to-consumer leisure platform. Jet2 is not only selling seats; it is increasingly selling the full holiday product, while retaining control over the aircraft capacity that supports it.
Since 2019, the scale of that platform has changed materially. Jet2 has moved from nine UK bases and a 90-aircraft fleet to 14 UK bases, more than 19MM passengers, and a mix where package holidays account for 66.5% of passengers and more than 80% of FY2025 revenue. Operating profit has more than doubled versus FY2019, while operating profit per sector seat has increased from around £15 to around £20.
That growth has not been reflected in the share price. Jet2’s shares are down almost 40% over the last year, leaving the company with a market capitalisation of around £2.3BB despite a much larger revenue base, a stronger package holiday mix and a balance sheet that remains unusual for the sector. Management has also been using the weakness actively: Jet2 completed a £250MM buyback, announced a further £100MM programme and has reduced the share count from around 215MM to less than 191MM over the last two years, while continuing to fund fleet growth and new base expansion.
Jet2 has many of the characteristics we like to analyse: an airline-linked business trading at a low headline valuation, with a strong management record, a clean Own Cash position, visible growth ahead and an aggressive buyback programme already underway. The market’s concerns are also clear. Jet2 is entering one of the largest investment cycles in its history, with 146 firm A321neo aircraft on order and average capex expected to be around £950MM per year from FY2027 to FY2030. This is happening while booking visibility has shortened, flight-only pricing has become more promotional, fuel remains a relevant risk and the UK consumer backdrop is less straightforward than it was during the immediate post-Covid recovery.
In this report, we analyse whether the current discount is justified, or whether it creates a potential opportunity in a business that the market may still be valuing too much like a conventional airline.
To do so, this analysis includes:
- A detailed explanation of Jet2’s business model, including the tour operator and airline operations, as well as the customer cash float generated by advance payments.
- An analysis of the evolution of Jet2’s market position, load factor and capacity absorption, the current competitive context and its growth plan through the A321neo programme.
- Current financials, including a detailed review of the balance sheet, our forecast for the current year – FY27 – management’s track record and capital allocation.
- A detailed valuation using a DCF model, with a step-by-step explanation, together with a comparison against key listed peers such as easyJet, Ryanair, TUI, Wizz Air…
- Our independent view on Jet2 and the potential opportunity currently offered by the market.
The Business
Jet2 is often approached by the market as an airline, but that framing is incomplete. The group is better understood as a vertically integrated leisure travel operator, where the airline provides controlled capacity and Jet2holidays monetises that capacity through higher-value package holidays.
That distinction changes the economics. A traditional airline mainly monetises the seat, baggage, ancillaries and network utilisation. Jet2, through Jet2holidays, sells a broader product that includes flights, hotels, transfers, baggage and in-resort support. Not all of that revenue is retained economically – a meaningful part is passed through to hotels and other suppliers – but the model allows Jet2 to control a larger share of the customer relationship, increase revenue per passenger and monetise its aircraft capacity through a higher-value product than flight-only travel.
The two business lines are distinct but interdependent. Jet2.com – the airline infrastructure – operates the aircraft, controls seat capacity, schedules flights from UK airport bases and provides direct access to leisure destinations. This side of the group retains airline economics: fuel exposure, operating leverage, aircraft ownership, maintenance and airport cost inflation. Jet2holidays – the package holiday business – contracts directly with hotels, sells ATOL-protected holidays and manages the customer relationship from booking to in-resort support. This side gives Jet2 more control over product, pricing, availability and service quality than a flight-only model.
The scale of the network is what connects both sides of the model. Jet2 has expanded from nine UK bases in FY2019 to 14 today, adding Bristol, Bournemouth, London Luton and, more recently, London Gatwick. Gatwick is the most relevant recent addition. Jet2’s model has historically been built around regional UK bases, where the group could combine brand strength, airport relationships and disciplined capacity deployment. Gatwick gives Jet2 access to a deeper London/South East market, but also raises the execution threshold because competition is more intense.
Today, Jet2 offers flights and holidays across more than 25 countries, 75 destinations, 800 resorts and over 600 routes. Customer loyalty supports that direct model: Jet2 reports an NPS in the mid-60s, a 61% repeat booking rate for package holidays and more than 8MM myJet2 members. These metrics do not remove the cyclicality of leisure demand, but they support direct distribution, reduce reliance on paid acquisition and give Jet2 a stronger base from which to sell package holidays directly to customers.
In FY2025, package holidays represented 66.5% of passengers and around 80% of revenue, which means the group’s economics are now driven more by the holiday product than by flight-only demand. This has two effects on the financial profile. The first is commercial: Jet2 captures a broader revenue pool per customer than a pure airline, even if part of that revenue is passed through to hotels and other suppliers. The second is financial: the package holiday model changes the cash cycle, because customers pay deposits and final balances before the holiday is delivered.