- Broker positive on airlines recovery
- Points out capacity is below pre-pandemic levels
- EasyJet is its preferred name in the sector
Liberum still thinks the airline sector’s recovery from the pandemic is in its early stages and sees scope for further progress thanks to strong underlying dynamics for the industry and despite a difficult economic backdrop.
The broker has lifted its forecasts for EasyJet (EZJ) and British Airways owner International Consolidated Airlines (IAG) after a bullish trading update from their peer Ryanair (RYA:EURONEXT) early in 2022.
Its favourite airline from an investment perspective is EasyJet which posts its first quarter trading update tomorrow (25 January).
Analyst Gerald Khoo said: ‘We see easyJet offering the best risk/reward balance at these levels. The upside from Holidays, seasonal pilot contracts and aircraft redeployment is underappreciated.’
WHY LIBERUM IS POSITIVE ON AIRLINES
Wider positives for the industry according to Khoo include ‘relatively careful capacity growth plans, stabilising jet fuel prices and encouraging forward booking commentary’.
He noted most regions will not see capacity match 2019 levels this year. Khoo said: ‘Air travel demand is cyclical, but through 2022 it shrugged off the deteriorating economic outlook and continued to recover from the impact of the pandemic.
‘It remains to be seen how long it can continue to defy economics, although with overall air travel volumes below pre-pandemic levels there may yet be headroom for further growth.’
The table below shows material increases in Liberum’s earnings per share forecasts for Ryanair, EasyJet and International Consolidated Airlines.
International Consolidated Airlines is scheduled to post its full year results for 2022 on 24 February.
