Jet2 plc (JET2) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us. I'm Steve Heapy, Chief Executive Officer of Jet2 plc. And I'm pleased to be taking you through our performance for the year ended 31st of March 2026, together with the growth strategy that gives us confidence for the years ahead. I'm joined today by Gary Brown, our Chief Financial Officer, who will obviously talk you through the numbers. But before that, I will start with the key highlights and the strategic context. Gary will then take you through the financial results in more detail, and I'll return to cover our growth plans, current trading and outlook before we open the line for questions. In simple terms, this has been another strong year for Jet2. We have grown passenger numbers, delivered record revenue maintained a robust operating performance despite clear cost headwinds and continue to return meaningful capital to shareholders. Let me begin with the headline performance. We delivered another year of record passenger numbers and record revenue. Operating profit remained resilient even after absorbing Gatwick start-up investment costs and wider industry cost pressures, including incremental premiums and increases in employment tax. The balance sheet remains a real pillar of strength for the business. We ended the year March 2026 with over GBP 2 billion of net cash giving us the flexibility to invest for growth, protect the customer proposition and deliver attractive shareholder value. During the year, we flew over 20 million passengers, that's 5% more than last year, with most of that growth delivered by our new at London Luton and Bournemouth. We also returned GBP 363 million to shareholders through share buybacks and dividends more than ever before. And today, we have launched a further GBP 250 million share buyback program, which we plan to complete by the 31st of May 2027. That combination of growth, resilience, cash generation and disciplined capital allocation is of paramount importance. It shows that Jet2 is not just growing for the sake of growth. We are growing in [indiscernible] is controlled customer-led and focused on long-term shareholder value. I'll now hand over to Gary Brown, who will take you through the financial results. I'll then come back and talk about the strategy and outlook.

Thanks, Steve. Good morning, everyone. I'm Gary Brown, I'm Group CFO, Jet2, and I'm pleased to present our financial results for the year ended 31st of March 2026. Starting with our key performance indicators on Slide 5. Overall, the group delivered a strong revenue and resilient operating profit performance this year with our KPIs illustrating how our flexible, fully integrated operating model is capable of adapting to changing consumer trends. The KPIs also demonstrates our clear focus on optimizing profitability through a combination of volume, pricing and product mix. We've kept our focus on growing the business this year, particularly as we expand further into the South of England. Across all our U.K. basis, we had 8% more seat capacity with our new bases at Bournemouth and Luton making up approximately half of that increase. Importantly, more people are choosing Jet2 than ever before with over 1 million additional passengers this year. Demand for our flight-only product was strong again with growth of 15% to 7.64 million passengers, demonstrating the strength and adaptability of our business model, particularly in a market where customers were booking closer to departure, and seeking those last-minute deals. We've continually stress that both our products are vital importance, and it's great to see customers recognizing the clear value that our flight-only offering brings: friendly flight terms, an industry leader for not canceling flights and with the added benefit of our red team of customer helpers providing that outstanding customer-first service. That said, we know customers still appreciate the convenience and flexibility offered by our package holiday product as customer volumes grew by 1% to a record 6.62 million. Package holiday pricing remained resilient, up 3%, of which around 1% came from more customers choosing 4- and 5-star hotels in last year, alongside the partial recovery of supplier-led cost inflation. Flight-only net ticket yield was down 7% as we chose to invest in price by reallocating marketing monies to support load factor and optimize overall profitability. Pleasingly, we also generated 4% more non-ticket revenue per passenger, primarily driven by higher in-flight spend per passenger following the successful launch of a refresh product range, together with continued strong onboard stock availability, both supported by our retail operations center. Turning to our financial performance on Slide 6. We delivered record revenue this year, up 4.3%, driven by the growth in passenger numbers, the combined yields and some mix with package holidays representing approximately 80% of the overall revenue. Our underlying cost base, excluding London Gatwick start-up investment was well controlled and was up 4.5% and only slightly ahead of revenue growth. The main drivers of this growth were hotel accommodation, which makes up 45% of our cost base, was up just over 6.5%, reflecting supply-led inflation and more customers choosing 4- and 5-star hotels. Land in handling and third-party navigation costs, which are around 8.5% of our cost base, increased by 8.6%. The growth above flying activity reflected a 4% increase in rates across airport charges, handling fees and euro-control flying fees. Offsetting this, fuel costs, which represent approximately 10% of our cost base, reduced by just over 1%, benefiting from lower fuel swap rates and unit cost efficiencies from our growing A321neo fleet. These benefits enabled us to mitigate an incremental GBP 32 million of premiums incurred this year, resulting from an increased U.K. and EU mandates. In addition, marketing costs fell by 9% as we chose to invest marketing monies into pricing to attract later bookings in a competitive marketplace. This helped support our average load factor and optimize our overall profitability. We also absorbed an additional GBP 18 million of costs from changes to the National Living Wage and employer national insurance. In addition to our underlying cost base, we incurred GBP 11 million of start-up investment costs ahead of the operational launch of our new basic Gatwick in late March. After these factors, pleasingly, our operating profit margin remained resilient at 5.9%, whilst our basic earnings per share was stable at 211.2p. Our return on capital employed remained healthy at 14.4%, despite continuing to invest in growing our A321neo fleet, which are obviously long-term cash-generating assets. Moving to Slide 7 and our cash generation. As you can see, we continue to deliver significant operating and free cash flows, giving us the capacity to invest in value-accretive opportunities as appropriate. Our 2026 operating cash flow of GBP 900 million was slightly lower than the prior year as customers delayed their bookings in response to the conflict in the Middle East. We spent GBP 391 million on capital expenditure, as we invested in our A321neo fleet and also completed construction of our second maintenance hangar at Manchester Airport last summer, which has increased our overall in-house maintenance capacity by some 50%. As a result, our free cash flow was GBP 495 million, meaning we have generated GBP 2.6 billion of free cash flow since the end of the COVID pandemic which gives us confidence in our ability to support our strategic capital allocation priorities moving forward. Our JOLCO financing increased by GBP 238 million to support the deliveries of our A321neo fleet whilst borrowing repayments were lower this year at GBP 248 million, driven by the one-off early repayment of the convertible bond last year. Importantly, the cash generation also supported shareholder returns with 22.1 million shares repurchased during the year through 2 share buyback programs, the second of which completed in early May 2026. Looking to our balance sheet on Slide 8. We have one of the most robust balance sheets in the sector with access to ample liquidity, which we believe is important in a fast-moving capital-intensive industry, such as ours. We took delivery of 10 A321neo aircraft this year, 6 from our long aircraft order with Airbus and 4 on 12-year operating leases to fill near-term gaps in the delivery profile. Our cost of debt remains low, helped by our decision to repay 4 of our Boeing aircraft loans early these loans being more expensive than the financing currently available to us in the JALCO market. We also returned GBP 363 million to shareholders this year, primarily through the 2 share buyback programs plus dividends. Overall, we remain in a strong cash position with total cash up 4% year-on-year, of which GBP 1.2 billion is our own cash, excluding customer advances plus our GBP 500 million revolving credit facility, which remains undrawn. We also took the opportunity to extend this facility by year to October 2030 with an option to extend for a further year if appropriate. Finally, on to our medium-term targets on Slide 9. We first talked through these principles at our interim results last November. Whilst we don't expect to meet these targets overnight, we believe they provide a very good indication of how our capital allocation is expected to evolve over the coming years. We believe a target of 2x net debt to EBITDA on an owned cash basis strikes the right balance between adequately protecting the business and using a sensible level of leverage to support returns. We currently have plenty of headroom against that target, but as we finance a higher proportion of our new aircraft deliveries, we anticipate moving to 2x over the next 3 to 5 years. We also believe holding own cash of between GBP 600 million and GBP 700 million at our year-end, which is a low point in the cash cycle, together with an undrawn revolving credit facility of GBP 500 million, gives us the right level of headroom to deal with any unexpected events. As of today, we don't expect this target to increase as the business grows and believe it remains the right level for us. We are firmly committed to our Airbus delivery pipeline with a further 124 aircraft scheduled for delivery by 2035. And on that basis, our capital expenditure will average towards GBP 900 million over the next 4 years. We intend to fund our A321neo deliveries, mainly through JOLCO financing, particularly in the short to medium term, as we look to take advantage of the competitive rates currently available. Across the full order, we plan to finance approximately 50% of the deliveries very much in line with our business philosophy of earning a healthy proportion of these valuable cash-generating capital assets, which we intend to fly through to end of life. Our capital allocation principles remain consistent: capital control to invest in and maximize the returns of the existing business in an ever-changing consumer landscape, keeping our balance sheet in good shape and shareholder returns subject to ongoing satisfactory financial performance. As Steve highlighted earlier, in total, we returned GBP 363 million to shareholders this year and approximately 15% of the current market capitalization. In part, this has helped support basic earnings per share growth of over 120% since 2019, together with an increase in profit after tax of some 190% over the same period. And as you've heard, we've announced a new share buyback program today, which will see us return a further GBP 250 million to shareholders by the end of May 2027 in addition to our usual dividend payments. a further sign of our confidence in the medium-term outlook and underlying our disciplined approach to capital allocation. I'll now hand back to Steve, who will take you through the remainder of the presentation.

Thank you, Gary. I'll now pick up with our growth strategy and the outlook. Our long-term strategy remains unchanged. very clear to be the U.K.'s leading and best leisure travel business. That's not just a strap line, it guides how we make decisions every day. We focus on customer-driven flight schedules to popular leisure destinations across the Mediterranean, the Canary Islands and European We retain control of our seat supply, we build long-term hotel partnerships and we stay absolutely focused on our customer-first approach. That proposition continues to resonate strongly with customers. We are a recommended provider in 7 categories. Our Net Promoter Scores are in the mid-60s and our customer satisfaction remains very high at 92%. Additionally, our flight cancellation rate is industry-leading at just 0.06%. We are also continuing to invest for sustainable long-term growth. We will have 31 Airbus A321neo aircraft in the fleet for summer 2026. And our second engineering in hangar at Manchester is now fully operational, increasing our in-house maintenance capacity by 50%. And of course, none of this happens without our colleagues. They remain central to everything we do. We continue to attract, develop and retain talented people who will deliver our award-winning customer service day in, day out with 78% of colleagues saying they're proud to work for Jet2. In order to deliver that strategy, we focus on 4 key levers which underpin our profitable multiyear growth agenda. First, fleet investment. We have committed orders for 155 Airbus A321neo aircraft through to 2035. That gives us certainty supply, meaningful unit cost efficiencies and a strong platform for responsible, profitable growth. Secondly, accelerating growth in the South of England. We have launched 3 new bases in the last 18 months and a significant opportunity to build our presence in a market where Jet2 remains underpenetrated compared with our more mature basis. We continue investing to deepen brand awareness and understanding to capture this fantastic opportunity. Third, continuing to do what we do best. -- delivering VIP customer service that drives loyalty, retention and advocacy, and it helps bring new customers to the Jet2 brand. And fourth, enhancing our marketing capability through data and technology. Working with Adobe, we're building a more advanced marketing platform to create a much more personalized booking experience. And improve efficiency through a lower cost of acquisition. All of these levers are supported by our strong liquidity position and our disciplined approach to capital allocation. The Airbus A321neo aircraft is central to our growth and cost efficiencies plan. By securing these aircraft during the COVID period, we benefited from highly attractive commercial terms ahead of the inflationary environment that followed. For summer 2026, we will operate 31 A321neo aircraft out of a total fleet of 139 aircraft with the fleet expected to grow to around 162 aircraft by 2032, supported by flexibility around the retirement of our Boeing 737-800s. This means that the fleet size could be higher or lower than this number, depending on the economic environment, et cetera. This aircraft brings very clear benefits. 232 seats, which is 23% more seats than the Boeing 737-800, 20% more fuel efficient on a per seat basis and around 50% quieter, which makes it a very attractive aircraft. That translates into an overall cost saving of around GBP 10 per seat versus the Boeing 737-800. By 2030, we expect the NEO fleet to deliver annual cost efficiencies of around GBP 190 million, helping offset the incremental cost headwinds from U.K. and EU Suman dates rising carbon costs and inefficient U.K. and European airspace management. Turning now to Gatwick and the south of England. Our launch at Gatwick is a major strategic milestone. It is a once-in-a-generation opportunity to accelerate our growth and establish a strong foothold in the South of England. Gatwick is the U.K.'s leading departure airport for beach holidays and city leisure bricks and is a perfect fit for Jet2 and our customer base. It gives us access to a catchment of more than 50 million people within 60 minutes by road or rail, and it is a natural fit for Jet2, given its strength in beach holidays and city leisure breaks. For Summer '26, we currently have 6 aircraft in operation at Gatwick, operating 79 flights a week to 29 popular leisure destinations across Europe with a further aircraft plan for summer 2027. The early performance has been pleasing. Forward bookings show a higher package holiday mix than we initially expected, and average load factor is in line with our other London basis despite going on sale later in the booking cycle. More broadly, we believe there is a compelling opportunity to increase our market share across the south of England through our bases at Bournemouth, Bristol, Luton, Stansted and Gatwick. Our household penetration in this region is currently less than 5% compared with over 13% across our established bases in the Midlands, the North of England, Scotland and Northern Ireland. Yet the U.K. population is split broadly 50-50 between these 2 areas. That shows the scale of the opportunity. We know the model works. We've built a market-leading position in our established basis by developing and protecting the brand, delivering outstanding customer service and creating loyal customers who choose to travel with us year after year. Our task now is to replicate that success in the South. Brand awareness in the South of England is also significantly below that of our established markets. We want to change this with targeted personalized customer activity. greater media waiting and a disciplined regional focus. By continuing to grow our presence in the South of England while maintaining the strength of our established base network we see a clear opportunity to further enhance Jet2's position as the U.K.'s leading leisure travel brand. Customer choice is another important part of our advantage. Our fully integrated model allows us to offer customers exceptional choice and the flexibility to create the holiday that is right for them. We offer an extensive network of flights and hotels across Europe and North Africa, serving popular beach destinations and city leisure breaks. We continue to broaden the program with destinations and holiday experiences that reflect changing customer preferences and emerging travel trends. North Africa is a good example. Our programs, Egypt and Tunisia, build on the success of Morocco and give customers access to an even wider range of high-quality holiday destinations at great value for money. Across the our product range now includes over 5,502 5-star hotels and more than 3,750 villas across 850 resorts. We are also expanding experiential travel through our partnership with amusement and our new Eurocom partnership will add 66 quality holiday parks across France, Italy, Croatia and Spain. The breadth of that choice reinforces our position as the U.K.'s leading leisure travel business and supports our long-term growth ambitions. The market backdrop also remains supportive. Around 1/3 of holiday makers expect to take more overseas holidays over the next 12 months, and that interest in package holidays remains ahead of the levels seen at the end of 2025. Independent analysis for Mintel supports this positive outlook, showing growing interest in beach holidays alongside an increase in the number of package holidays taken by U.K. residents in recent years. Jet2 is exceptionally well placed to benefit from those trends. We have 1 of the strongest and most trusted brands in U.K. leisure travel with the highest brand awareness in the sector. that helps keep us front of mind when customers are planning their well-owned getaways. But the real differentiator is service. We continue to lead the industry on customer satisfaction loyalty and repeat bookings because our customer service is consistent from start to finish. From the customers book through the airport with support from our red team, onboard with our cabin crew and in resort with our red team of customer helpers. Customers tell us that they value that. Satisfaction scores are over 90%, repeat booking rates are very strong at 61% for Jet2 Holidays and 55% for jet2.com, and our industry-leading Net Promoter Score of 65 is 45 points higher than the European airline average. That gives us confidence in the strength of our brands, our competitive position and our ability to deliver sustainable long-term growth. And great customer service breeds loyalty. We are focused on driving customer loyalty building consumer advocacy and reinforcing our position as the first choice of company for holiday customers across the U.K. 43% of our direct bookings came from customers who have traveled with us more than 6 times and these bookings have increased at a 23% compound annual growth rate over the last 3 years. We built our loyalty through relevant communication, tailored content and above all else, the consistent delivery of VIP customer service. As customers come back more often, we deepen those relationships with exclusive benefits and recognition helping to convert first-time bookers into loyal customers who choose us first and recommend us to others. That much is commercially because loyal customers have a higher lifetime value, book more frequently and reduce acquisition costs. We're also using data and technology to deepen those customer relationships. Data and technology will help us go further. Our marketing customer database now stands at 11.2 million customers, and over half have previously booked or travel with us in the last 25 months. Our myJet2 members have increased by 45% over the past 12 months to more than 9 million. Every additional recognized and permission member gives us deeper customer insights and a richer data asset enabling improved personalization, stronger loyalty and better repeat booking performance. Working with Adobe, we are using that data to deliver more personalized marketing, improve efficiency and strengthen customer engagement. Over time, that creates further opportunities in media and partnerships while helping us attract and retain customers more efficiently. Turning to current trading. Bookings to date for summer 2026 are encouraging. As you would expect, the conflict in the Middle East has influenced customer booking behavior with some customers choosing to book even closer to departure than usual or choosing a destination different from their originally intended destination. However, demand for our products remains resilient. The combined booked average load factor for the first 4 months of the year is currently 1.2 percentage points ahead of the prior year. As we said in our April trading update, we are continuing to invest in load factor through attractive pricing to take advantage of strong late booking momentum. Gatwick is also performing well. The package holiday mix is stronger than expected, and we now plan to operate 7 aircraft at the base in summer 2027 as we continue to execute our strategic growth plans in the south of England. Importantly, we also have a high degree of cost certainty having hedged 90% of our full year jet fuel requirement at an average price of $743 per tonne along with 85% of our FX requirements. Stepping back, Jet2 is a business with strong fundamentals, a clearly differentiated business model, a compelling product proposition strong customer loyalty and a brand built on trusted award-winning VIP customer-first service. As usual, we will issue a further update on peak summer trading at our AGM, which this year will be held in leads on the 3rd of September. Let me close by bringing this together. We remain confident in Jet2's ability to deliver sustained profitable growth through our differentiated, fully integrated business model. We have the right fleet to support our long-term growth plans with the A321neo unlocking significant cost efficiencies and giving us a strong platform for growth. We have a clear opportunity to expand in the underpenetrated south of England, including through Gatwick, where early performance is encouraging. We have a customer proposition that is trusted, differentiated and consistently well rated by customers, underpinned by our award-winning VIP service. We are building deeper customer relationships through loyalty data and technology, which should support better retention, more efficient marketing and a higher lifetime value. And we have a strong balance sheet that allows us to invest in strategic opportunities whilst continuing to return capital to shareholders. That is why we believe Jet2 has a clear competitive advantage and a strong platform for long-term sustainable and profitable growth. Thank you for listening. Gary and I will now be pleased to take your questions.

[Operator Instructions] We will now take our first question from Harry Gowers of JPMorgan.

I've got a couple of questions. The first one, clearly, there's been some better bookings momentum post the Middle East and some of those volume gaps look like they're closing. But I wanted to know how aggressively are you having to stimulate on price in the late [indiscernible] the close-in bookings to get the volumes through. So any numbers you could potentially give us on the pricing very close to the departure? And then second question, maybe one for Gary. But what we expect for supplier-led cost inflation across the March '27 year? And how much of that do you think can be passed on or kind of offset by a higher package pricing?

Harry, it's Gary here. In terms of the pricing at the moment, Holiday's pricing is holding up reasonably well. It's in positive territory. As you might expect, bearing in mind, it is a late market. Piton tends to be more price sensitive. And we've made the points on a number of occasions we invest in load factor. So pricing on the flight only is sort of mid-single digits down year-on-year at this moment in time. In terms of the cost inflation running through the P&L in '27, just over 3%, but you've also got a bit of a headwind around FX as well. So you're closer to 3.6%, 3.7%. We always look to pass on cost inflation, but it's very much supply and demand. So we'll do what we can, but I can't give you any clear view at this stage other than as I said before, holiday pricing is pretty resilient and flight is a bit more price sensitive as you would expect.

We'll now take our next question from Jarrod Castle of UBS.

Firstly, maybe one for Steve. Gary, I don't know. Any views on what a hot summer could mean? The U.K. obviously is seeing some very hot weather. Does that impact your business? And do you have to work a little bit harder? Secondly, I'd I'd like to get your comments on how you see things with the European entry system. How you've got fantastic on-time performance, but is that a concern for you in terms of getting customers back? And then lastly, I don't know if you can make some broad comments, but just how you see the market in terms of consolidation. Obviously, you've got a proposal for easyJet. So any views on that? How do you see the landscape changing over the next 3 to 4 years?

Steve here. Hot summer, not worried about that at all in it. In fact, it's actually a good thing. I mean some are by the very nature, hot. It is the hottest time of the year. We have seen some or unusually hot periods abroad and in the U.K. But at the end of the day, people want to go somewhere warm, somewhere sunny to get away from what is the norm in the U.K. climate. I'm sure the hot weather will pass, certainly in the U.K., and we'll get back to our normal summer, which is a lot cooler. We've seen no evidence of people wanting to go to cooler destinations. Our booking profile is still pretty flat throughout the summer. So it was very strong at the start and end of the season and strong in the middle, but we haven't seen any noticeable trends at all of people trying to avoid the hot summer. It's still the busiest time of the year and people still want to go away and experienced some nice heat unlike the heat in the U.K., which is horrible sticky, it's dry overseas, and you can have a very nice time. So no impact whatsoever. In terms of European entry system. We've seen some impact with longer queues at immigration, passport control, et cetera. but our customers have been relatively unaffected. Some have experienced the longer queues, but we have not left any customers behind. We've not taken off without having them all on board. And 1 of the reasons for that is our famous red team of customer helpers who will identify the Jet2 and Jet2 Holidays customers and try and help them to get through quickly if there is an issue. We have, of course, been lobbying European governments to delay the implementation of the EES systems, and we've had some successes, the Greek government took advantage of the delay that they can implement for 5 months, and we've seen queue times at Greek Airports improve significantly. I get a report every week of the delays that we have experienced and where we consider that the delays are bad getting worse, et cetera, we write to each government in each airport advising them of the opportunity to delay the implementation of the EES scheme. So we're on top of that. But our red team make sure that our customers are the least affected of customers in airports. I would hope the European government might do something in the longer term. We have written individually as Jet2 as part of our industry bodies to to adviser of the issues that people are experiencing and asking us to look again at the implementation schedule. In terms of easyJet, as you'd expect, our policy is not to comment on market speculation. I'm not going to be part from that, if that's okay. There's a lot of speculation about, and I'll leave that to other people to speculate.

We'll now take our next question from Damian Brewer of Canaccord Genuity.

Two questions from me. First of all, -- on the capital allocation, you've now been very clear about the JOLCO financing. It's the 321neos, the $700 million minimum threshold and the 2x net debt to EBITDA. But if 1 throws that into numbers, that opens up quite significant spare capital in the business. Can you talk a little bit about how you think about deploying that spare capital? Are there any opportunities to accelerate growth where it's profitable put more back to shareholders maybe or any other thing that you could think of that would obviously generate similar high returns that you've generated in the past? And then the second question, you've given us a lot of detail in the presentation about customer acquisition and your shares certainly seem to recognize that outperforming to and on the beach by nearly over 30% in 1 case this year to date. But are you seeing anything from what you've seen, for example, at Gatwick or Luton or in the last half decade given Bristol is now half a decade old that makes you confident I'm so confident in the outlook in terms of taking market share and winning share within the U.K. market.

David, I'll take the first one. It's Gary here. In terms of capital allocation, the framework is pretty clear. We do want to continue to invest into the existing business to deliver good return on capital employed, which I think we've demonstrated for for many years. And in terms of growth and where we could deploy that capital, if I look back even to 2023, you can see our flown passengers are up by about 30%, and so we're still very much growing. Gatwick is a significant opportunity for us, as you've seen on that presentation in an underpenetrated market for as is London more generally. And therefore, I do think we'll deploy more of our capital in the south of England because that represents a great opportunity for us. I was very clear on the presentation as well that subject to satisfactory financial performance. And as you've seen, certainly more recently, we will give shareholders capital returns and we fully expect to do that. But I will reaffirm that subject to satisfactory trading. In terms of our strategy, we're very clear. It's about growing the business. building a business that is the strongest in the industry and delivering long-term value creation for shareholders. So hopefully, that should resonate with both customers, colleagues and the various stakeholders, including shareholders.

Damian, it's Steve. On to the second question, yes, we are confident about our ability to capture market share. You mentioned a couple of launches we've done. If we go back a little bit to Bristol, Well, we've got a good program at Bristol Airport. We've captured market share, the same at Luton, Gatwick. And that's because people recognize our customer service, our VIP customer service our red teams, both in resort and overseas at the airports. And that's borne out in some of the statistics we've talked about this morning, 92% customer satisfaction rate, 62% rebook rate 65% Net Promoter Score. And I think people are attracted to our customer proposition. They don't just want a company that throws together the components of the holiday and then leaves them to their own devices. They want someone that will look after for the whole holiday. Today, the institute for customer service has announced their latest results. Jet2 Holidays is the highest ranked tour operator, the fourth best company in the U.K. or from the fifth best yesterday and jet2.com, the highest-ranked airline in the U.K. at 14th best company, up from 16th best company. So we're certainly not resting on our laurels and getting complacent we want to improve our customer offering very every year. and differentiate ourselves from the competitors, and that's something that is very much recognized by our customers. When we speak to them, we ask them why have you bought with Jet2, our Jet2 Holidays, why are you sticking with them? Customers consistently tell us it is the customer service that attracts them. They want to be made feels [indiscernible] and why wouldn't you? When you're going on holiday, you want your holiday to start the minute you get to the airport and you want it to be seamless. I certainly do when I go on holiday. So to get back to the original question after quite a lengthy monologue, I'm very confident in our ability to capture more market share at our newer basis such as Gatwick, Bournemouth, Luton and before that Bristol.

And we'll now take our next question from Ruairi Cullinane of RBC.

First question on hedging, how do you approach that in recent volatilities, your hedge position in full year '28, where it would typically be at this stage in the year? And then secondly, a follow-up question from Damian's on leverage in capital allocation. I can see on the CapEx slide, CapEx peaks '31 that sounds significantly '32. Is the 2x leverage target, something you might hit in 2031 and what could be a year of peak leverage or is it more of an average in an average year?

Yes it's Gary here. Yes. In terms of hedging, we haven't fundamentally changed anything, to be honest with you, because we were so well hedged in particular on fuel. We've now moved up to about 97% for summer '26 and over 70% for winter. So we're over 90% hedged for financial year 27 we're about 35% hedged in totality, particularly on fuel, which is broadly in line with where we would expect to be. we're not going to throw the hedging policy out of the window because there's a lot of volatility that served us well for over 13, 14 years. But we are taking advantage of weakness in the market when it presents itself. So we're pretty comfortable with that. In terms of the second question in terms of 2x net debt EBITDA and on cash basis, we've said or I said in terms of the video, it will be over the next 3 to 5 years is when we expect to achieve that number. That very much depends on how many of our aircraft we financed during that period and also the delivery profile of the aircraft during that period, which is subject to movements, albeit we've managed it well. I'm not going to go into any more detail on that because I do think we've set out our targets very clearly to get into the intricacies of that in terms of intra years, I think, would be not responsible at this stage. I think it's very clear we want to return capital to shareholders. We also want to continue to invest in the business, drive really good and meaningful return on equity and return on capital employed.

And we'll now take our next question from Jack Raeburn of Bank of America.

Congratulations on results. Three questions from me, if that's okay. Firstly, could you refresh us on your medium-term package mix ambitions and how we should think about fiscal year '27 should we maybe expect some moderation for fiscal year '26 with the Gatwick ramp? And then maybe provide any more details on initial progress at Gatwick as well, specifically details around package mix relative to the group, pricing relative to the group and a refresh on start-up costs associated with it from fiscal year '27 going onwards? And finally, accommodation cost inflation continues to outpace package pricing growth. I was just wondering how long do you expect this headwind to persist and what needs to change for that pressure to begin easing?

In terms of the medium-term package holiday mix, we've been pretty clear that we would expect between 60% and 65% on a full year basis. So last year, it was 63. I would expect this year to be in or around the 60. Bearing in mind, it has been a much market as a result of the Iran war. We're comfortable in that range. That doesn't mean we are fixed on that range. The flight-only product is still incredibly important. We've always made that very clear across a number of years. And as Steve pointed out on an earlier call today, people who take flight only often become the package holiday customers of the future. So they get all of the service for the price of a touch, which is great value for them, and hopefully, they see that. In terms of Gatwick, the package holiday mix is a little below the 60 at the moment, but not far below the 60. In terms of the investment into this year, well, we're sort of into BAU now. So the start-up investment happened last year. So we're in BAU in terms of investing in people, invest in marketing, et cetera. I think getting into pricing at Gatwick in all this detail is a little bit commercially sensitive, and I wouldn't want to do that on this call.

Yes. In terms of accommodation inflation, sorry, that's the third part of the question, sorry about that. There's a lot to take in. No, it's all right. Accommodation inflation is somewhere in the region of about 5% or that's what we think at the moment. Now you've got to remember that's initial -- but what we are seeing, particularly in the Eastern Mediterranean, you get in a lot of special offers from hoteliers, et cetera, which can pull that headline inflation rate down. I think it's fair to say, though, that hoteliers in Europe having a pretty good time of that at the moment. It's not just a U.K. market, it's a European market as well. They have significant headwinds still in terms of labor, in terms of energy costs, et cetera. I'm not anticipating that coming down fundamentally over time. So therefore, how we contract in the future will be very important, and that's why we are in terms of a project internally, we're looking at dynamically so supply, which means we get the benefit of secured rooms, but we also get the benefit of rooms that are in the later market that come in at a slightly lower price as well. So I think technology is going to help us there, and we'll get the best of every world.

And we will now take our next question from Gerald Khoo of Penmure Liberum.

First off is with package market share. What do you think happened to your U.K. package holiday market share? Package customers being up 1% suggest that you might have lost share if the market grew by more than 1%, which seems likely. Secondly, well, second and third on Gatwick. You talked about deploying extra aircraft there. Where are you getting the slots from next -- for summer next year and where are you redeploying the aircraft from? And also on Gatwick in terms of the potential setting runway. I mean, what's your view on the likelihood that that happened in -- it seems like it's cleared all of its legal challenges? And do you think you've got the fleet to take advantage of that extra opportunity?

In terms of share, Gerald, I mean, in terms of what you're looking at, really, if you're looking at the total at licenses, we're still at GBP 7 million of just over GBP 35 million that are out there. what you don't understand in terms of that, not you, but is what elements of those licenses are for long haul or for crews and things like that, which aren't exactly, I guess, facing of directly with us. In terms of our share, we think it's just over 20%. It hasn't changed fundamentally over the last 2, 3 years, actually. And so we're pretty comfortable at that level. In terms of the Gatwick expansion of the slots, I'll pass that 1 into Steve, if that's all right.