13th Apr 2022 15:02
(Alliance News) - Liberum on Wednesday took heart from easyJet PLC's first-half trading statement, hailing its strong forward bookings and capacity figures.
The broker said guidance for a slimmer loss was "helpful".
"The demand outlook remains positive, with strong forward bookings and capacity set to match pre-pandemic levels this summer," Liberum said.
Liberum rates easyJet at 'buy' with an 800 pence price target.
easyJet on Wednesday revealed it forecasts a a narrowed half-year loss with current operations running broadly as planned despite wide-spread reports of disruption.
For the half year ended March 31, the budget airline expects revenue of GBP1.50 billion and headline costs around GBP2.05 billion. It has guided for a headline pretax loss in the range of GBP535 million to GBP565 million, which would be narrowed from GBP701 million year-on-year.
The firm said summer bookings for the last six weeks have tracked ahead of pre-pandemic levels as travellers book closer to departure.
easyJet expects its third quarter capacity to be about 90% of the same period in 2019, while capacity in the fourth quarter should "remain near" the level seen in the final quarter of 2019.
Liberum added: "easyJet is within sight of returning to pre-pandemic capacity levels. However, we believe the group will be in a structurally better position as a result of various changes implemented during the pandemic. easyJet has taken action to improve its cost base, notably through the more widespread use of seasonal pilot contracts. It has also added to its slot portfolios at key congested airports, as financially weaker airlines have retreated. These airports typically deliver higher returns for easyJet.
"Put another way, easyJet's capital and capacity should be deployed more effectively, to bases with either higher unit revenues at congested airports or lower unit costs at seasonal bases. Furthermore, seasonal pilot contracts should reduce losses over the winter."
In recent months, oil prices have soared, exacerbated by Russia's invasion of Ukraine.
For airlines, rising oil prices mean chunkier jet fuel costs.
Liberum added: "The fuel cost headwind is significant, despite hedging, but this could be offset by pricing."
The broker noted easyJet is 64% hedged for the remainder of the financial year.
By Eric Cunha; [email protected]
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