Two of Europe’s biggest budget carriers will reveal their third quarter financial performances next week.
Investors in Easyjet and Wizz Air will be keenly focussed on whether the post-Covid boom in travel demand held up in the latter part of 2023, amid concern of a drop-off following the busy summer season.
Carrier’s across the board enjoyed a broadly stellar share price performance last year as droves of consumers opted for holiday’s after years of lockdown restrictions, despite the cost of living crisis.
But disruption throughout the second half has threatened to take the shine off the sector’s great rebound.
Shares in a slew of airlines, including the two budget rivals, British Airways owner the IAG and Jet2, fell in October after the Israel-Gaza conflict caused a spike in global oil prices. That was despite upbeat financial results announcements and a record summer.
While the stocks have since regrouped, there are a number of recurring issues to add to the Middle East disruption, which are fueling some tepid reactions to results announcements.
Air traffic control disruption has continued across Europe and in the UK, following the National Air Traffic Service (NATs)’ system-wide outage over the summer. Easyjet is particularly vulnerable to problems at its primary hub Gatwick, which has been plagued by air traffic issues in recent months and has had to cut flights due to French ATC walk-outs in the past.
Wizz Air has underperformed most of its competition in recent months. It is still reeling from the fall-out of supply chain issues at its Pratt and Whitney GTF engines, which have forced it to slash second half capacity forecasts by 10 per cent. Coming into the new year, December’s passenger numbers were disappointing, with less carried than expected and a far lower load factor.
However, demand for travel has not cratered just yet, profits are still soaring and a number of airlines’ are looking to expand their route offerings for next summer.
Analysts are backing Easyjet into the new year. The Bank of America upgraded the airline to a ‘buy’ rating from ‘underperform’ on Thursday, noting its booming holiday’s segment and stable ex-fuel unit costs.
Full-year pre-tax profits are now expected to come in 14 per cent higher at £549m on strong year-on-year load factors, edging the group closer to a goal of £1bn profit by 2029.
Wizz may get the same backing too, if it can give investor’s confidence its supply chain hiccups won’t hit performance too significantly.
