If Castlelake walks away from its pursuit of easyJet this weekend, which I still think is the most likely outcome, I suspect the market will once again do what it has consistently done over the last decade and focusing entirely on the negatives of high fuel prices, geopolitical uncertainty, airport disruption and airline yield pressure, whilst continuing to ignore what I increasingly believe is the most important strategic transformation taking place within the company.

The reason I remain a bullish easyJet investor, irrespective of whether a private equity bid ultimately materialises, is that investors still appear to value the business primarily as a low-cost airline, even though it is rapidly becoming one of Europe’s largest and most profitable integrated leisure travel businesses.

Historically, airlines have always struggled to achieve attractive valuations because the economics of aviation are notoriously difficult. Fuel prices fluctuate, aircraft are expensive, labour costs continue to rise, and geopolitical events can wipe out demand almost overnight. As a result, investors have traditionally applied relatively low earnings multiples to airline businesses, regardless of how well they are managed.

However, what many investors appear to be missing about easyJet is that the company has quietly built a highly experienced, driven management team, lead by airline CEO Kenton Javis, who started his travel career with me at holiday giant Airtours before moving to Tui, and the highly respected Garry Wilson at the helm of easyJet Holidays. You simply cannot buy this level of experience, and between them, they have created one of the UK’s fastest-growing package holiday businesses, and, importantly, one that benefits from a structural advantage that very few competitors can replicate.

The publicly available numbers tell the story.

During the 2025 financial year, easyJet’s airline business generated approximately £415 million in profit from over 104 million seats sold, equating to roughly £4 per seat flown or £8 per return flight. By comparison, easyJet Holidays generated £250 million in profit from around 3.1 million package holiday customers, equating to approximately £81 of profit per holiday customer sold. In simple terms, easyJet currently makes around ten times more profit from selling a package holiday than from selling an airline seat.

This distinction matters enormously because, whilst the airline business itself will probably continue to grow at relatively modest rates, the holiday business still has substantial runway for expansion. The package holiday operation currently represents only a small percentage of the total customer base travelling on easyJet aircraft each year, meaning there remains a very significant opportunity to convert existing flight-only customers into much more profitable holiday customers.

To put this into perspective, every additional one million package holidays sold annually at current profitability levels would add approximately £80 million of additional profit to the group, so assuming a growth of 5 million over the next 5 years, add £400 million to the bottom line, which, at a sensible P/E of 10 would increase the business value by 4 billion, which is an extraordinary figure.

This is why I believe the current debate around whether Castlelake should pay 650p, 700p or perhaps even more for easyJet may be missing the bigger picture. Private equity investors are not stupid, and although they understand that airlines alone are difficult businesses, they also understand that integrated travel businesses with strong brands, direct customer relationships and high-margin package operations can command substantially higher valuations.

The irony is that whilst public market investors continue to value easyJet as if it were simply another cyclical European airline, private equity may be looking at the business very differently, seeing not an airline with a holiday division attached, but rather a rapidly growing holiday company that happens to own one of Europe’s best short-haul airline networks.

Whether a bid emerges this weekend or not, therefore, becomes almost secondary. My suspicion remains that easyJet’s long-term value will ultimately be determined not by the number of seats it flies, but by the number of holidays it sells.

Until the market fully understands that distinction, I believe easyJet remains materially undervalued and will continue to buy shares.