EasyJet likely to be flying lower than rivals, Barclays reckons
By Oliver Haill
Date: Thursday 17 Jan 2019
(Sharecast News) - Barclays analysts predict that uncertainty around airline demand will be sky-high in 2019, with airlines also needing to battle fuel headwinds, with easyJet shares seen as most at-risk.
"Whilst indications for supply growth are supportive, it is still too early to know if summer capacity growth will be disciplined enough," Barclays said in a note on Thursday, with the pullback in oil prices negated by hedging profiles so that all airlines still face fuel cost headwinds in summer 2019.
Analysis by the bank shows that the unit revenue growth needed to offset this unit fuel headwind is higher than current consensus expectations, meaning that airlines will need to flex ancillary sales make other unit cost reductions to support profit growth.
Barclays sees the strongest adjusted profits growth at Wizz Air of 34%, followed by Air France at 20%, Ryanair at 8%, while IAG and Lufthansa are seen delivering "broadly flat profitability", while estimates for easyJet are for a 5% decline.
"These growth numbers would clearly be vulnerable to the oil price and any demand wobble (with eyes currently on March)."
EasyJet was downgraded to an 'underweight' rating from 'neutral' as a "purely relative call" as comparable numbers from last year will be "particularly tough" due to oneoffs, alongside industry-wide demand uncertainty from UK passengers, significant disruption impact on unit cost progression "and a strategy focused on holidays, business and loyalty that does not move the dial in the near term".
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