Tuesday, May 30th, 2023

easyJet, Jet2 updates hint good times returning for airlines

Jet2 PLC (AIM:JET2) became the latest to shower the aviation industry with optimism when it lifted profit guidance for the second month in a row on Thursday.

Following easyJet PLC’s solid results last week, Jet2 noted it would likely outdo previous guidance and score a pre-tax profit in the region of £387mln to £392mln for 2022.

Both airlines scored a host of buy ratings following the updates, with easyJet anticipating a return to pre-pandemic passenger figures this summer and Jet2 on course to do the same.

“By the summer the Covid nightmare looks set to be little more than a bad dream,” Hargreaves Lansdown analyst Susannah Streeter commented.

EasyJet is “facing little turbulence from cost-of-living headwinds,” she added, with Jet2 also agreeing people were “eager” for holidays after being denied during the pandemic.

RBC Brewin Dolphin manager John Moore hailed that easyJet’s update proved the FTSE 250-listed low-cost carrier was “beginning to turn a corner,” meanwhile.

Though London-listed Jet2 avoided delving too deep into guidance for the coming year given 40% of its summer tickets remain on sale, a 7.2% rise in capacity to 15.26mln seats for the period proved its optimistic stance.

If sold, Jet2 would pen a rise on 2019 passenger figures, which sat at 14.3mln in the final full year before the pandemic grounded flights en masse, prompting Barclay’s to issue an ‘overweight’ rating.

Liberum analysts pointed to Jet2’s “positive outlook” following the update, hinting trading should be strong this summer, alongside easyJet, Ryanair and British Airways owner International Consolidated Airlines Group SA (LSE:IAG) (IAG), which were all tipped with ‘buy’ ratings from the bank.

IAG will update on its first-quarter earnings on May 5, followed by Ryanair’s full-year results on May 22, providing further insight into their respective post-Covid recoveries.

Ryanair has already consistently carried more passengers in the past year than in 2019, reporting traffic of 12.6mln people most recently in March, with a load factor of 93%.

Citi analysts predict this bounce-back to spread to short-haul flights across the board in the UK and Europe towards the end of this year.

However, the bank warned longer journeys, flown by the likes of British Airways, would not yet catch up, in a note earlier this week.

“Recovering business traffic,” cited by Citi, will likely mark good news for British Airways, given it is “highly dependent” on corporate travel, though whether it makes up the 30% shortfall on 2019 passenger figures penned last year remains to be seen.

One elephant in the room for the sector may also be the looming threat of strikes in Europe.

Security staff striking at Heathrow and air traffic controllers in France helped to push cancellations above 33,300 flights between April 5 and 11, up from 7,800 during last year’s East period, according to Airhelp data.

Since neither dispute looks set to be resolved, with the former group set to strike again for ten days in May, the effects of industrial action on aviation and its return to pre-pandemic trading seem yet to fully emerge.

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