Jet2.com: strong FY2013 profit growth hides major challenges

Jet2.com is a two-sided coin. Profitable every year since FY2008, the LCC's FY2013 operating margin puts it in the top half dozen European airlines. In 2013 its operating profit grew by 23%, helping to drive parent Dart Group to a 33% increase in its operating result. The group, and the airline, appears to be well managed and well capitalised. Jet2.com serves leisure markets from bases in the northern parts of the UK and its top 10 routes include seven where it is the leading carrier.

However, Jet2.com also faces significant challenges. It faces competition from lower-cost LCCs in many of its markets and, although its network concentrates on slightly further flung destinations, the likes of easyJet and Ryanair are also moving into longer sectors.

Jet2.com's capacity is more seasonal than any other leading carrier in the UK, bringing significant challenges to achieving year-round profitability. Its policy of acquiring second hand aircraft minimises capital expenditure, but gives it an ageing fleet with a structural operating cost disadvantage.