15th Feb 2022 11:06
(Alliance News) - Analysts at Liberum expect travel curbs across Europe to ease once more as Omicron's impact wanes, bolstering airline stocks, with the broker favouring the likes of easyJet PLC, International Consolidated Airlines Group SA and Ryanair Holdings PLC.
According to Liberum's Travel Restrictions Index, there has recently been a pause in the easing of government measures.
The broker added: "We do not expect this to last long, and remain optimistic that there will be a resumption in the relaxation of limitations on international travel as the Omicron wave passes. Airline capacity plans appear to mirror this assumption. Most regions continue to see optimistic capacity plans for the summer.
"Our index shows a marginal net increase in restrictions since the end of January. This follows the introduction of tighter measures in Denmark, Switzerland and the USA."
Liberum said there is pressure on politicians to look like they have a handle on virus cases; hence why an easing of travel curbs has taken a pause recently.
Looking ahead, though, capacity forecasts for intra-European travel suggest there is optimism in the airline sector.
"Intra-European capacity is tracking higher slowly, closing in on 100% of 2019 levels for Q2 and Q3, and already well ahead for Q4. We are slightly sceptical of the figures, with many industry sources suggesting that 90% to 95% may be more realistic than the 98% to 99% of 2019 levels shown in the database," the investment bank said.
"Capacity should have disappeared from the market, with multiple airline failures and restructurings, along with the reduced need for short haul flights connecting to weaker long haul routes. Nonetheless, the direction of travel would seem to imply steadily improving confidence in the demand outlook for Summer 2022."
Higher fuel prices could hit profits for airlines, however, particularly those that are "poorly hedged".
On individual stocks, IAG, easyJet and Ryanair are Liberum's most favoured. It has a 'buy' recommendation for the trio. Conversely, it rates Air France-KLM SA and Deutsche Lufthansa AG at 'sell'.
By Eric Cunha; [email protected]
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