Two of Europe’s most popular budget airlines, easyJet plc (AIM:WIZZ), will release their quarterly results next Wednesday and Thursday to show the full extent of trade-down among passengers.
Investors can expect bumper results if the stock market performance is any indication.
EasyJet has seen a 35% increase in LSE prices year to date. Wizz Air has experienced a nearly 45% rise, far outperforming their premium competitor British Airways’ parent company International Consolidated Airlines.
Despite the fact that customers feel the inflationary pinch, easyJet chief operating officer David Morgan expressed optimism about the future of the airline industry in 2023.
Morgan stated earlier this month that while there have been a few surveys showing consumers saving money in certain areas, they are not spending it on their vacations or travel. However, Morgan added: “We don’t intend to stop inflation. But people are prioritising their travel and putting off renovating their bathrooms.”
Lower fuel costs are also a boon for carriers, with Brent crude dropping 22% to US$86/barrel in the six-month trailing.
Analysts at JPMorgan have, on average, raised their EBIT earnings predictions for the entire airline sector by 12% and 5% respectively for full-year 2022.
Analysts stated that “despite carriers trying to increase capacity materially year on year, the unavailability and continued pent-up demand could offer more supportive pricing environments than most would have expected just a few months ago.”
Wizz Air’s load factor is an important metric that you should keep in mind.
Recently, the Hungarian airline reported that its load factor was 84.5% for December. This represents a 9% increase over the same period in 2021. However, Peel Hunt analysts stated that this was below their expectations of 90%.
Peel Hunt’s buy rating has not been lowered. Bloomberg estimates suggest that the company will continue to make gains in reducing its earnings-per share losses through 2023.
Wizz Air could also benefit from the launch of 20 routes to Saudi Arabia.
As the post-Covid recovery continues, both easyJet as well as Wizz Air will likely post net losses. However, their earnings calls should shed light on where they’re headed in the future.