Proactive Investors - The full extent of trade-down trends among airline passengers will be front and centre when two of Europe’s largest budget carriers, easyJet plc (LON:EZJ) and Wizz Air Holdings PLC (LON:WIZZ), release their quarterly results next week, on Wednesday and Thursday respectively.
If stock market performance is anything to go by, investors expect to see bumper results across the board.
Year to date, easyJet has added 35% on the LSE, while Wizz Air has soared nearly 45%, vastly outperforming their more premium competitor, British Airways’ parent company International Consolidated Airlines (IAG (LON:ICAG)).
Despite customers feeling the inflationary pinch, easyJet’s chief operating officer David Morgan had expressed optimism for the airline industry in 2023.
“We’ve seen a number of surveys showing consumers might be saving in some areas, but not on travel or their holidays,” Morgan said earlier this month, adding: “We’re not going to stop inflation, but people are prioritising travel and putting off renovation of their bathroom.”
Carriers are also benefitting from cheaper fuel costs, with Brent crude falling 22% to US$86 per barrel in the trailing six months.
Brent crude prices began falling in June 2022 – Source: tradingeconomics.com
Across the whole airline sector, analysts at JPMorgan (NYSE:JPM) have on average raised their EBIT earnings forecasts by 12% for full-year 2022 and by 5% for full-year 2023.
“Despite carriers aiming to grow capacity materially year-on-year, the unavailability of aircraft and continuing pent-up demand could offer a more supportive pricing environment than most would have expected a few months ago," the analysts said.
Wizz Air’s load factor will be an important metric to take note of.
The Hungarian airline recently said it had a load factor of 84.5% in December, representing a 9% increase in the same period in 2021, but analysts at Peel Hunt said that came below their expectations of 90%.
Nonetheless, Peel Hunt has retained its buy rating for the carrier, while estimates compiled by Bloomberg suggest the company will make progress toward cutting its earnings-per-share losses throughout 2023.
Wizz Air may also see a boost due to its launch of 20 routes to Saudi Arabia.
Both easyJet and Wizz Air are expected to post net losses as the post-Covid recovery continues to pan out, but their earnings calls should shine a light on where they are headed going forward.
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