European airlines to shake off consumer gloom in upcoming results season: Bloomberg Intelligence analyst gives earnings preview

European airlines’ quarterly results are likely to confirm a significant reduction in winter losses vs. last year while defying recession fears with strong summer bookings as consumers still pay up for travel, says Bloomberg Intelligence (BI).

BI calculate the spot price of jet fuel has almost halved since June’s peak, which provides cost relief and could ease price inflation. Utilisation is recovering and operations appear better resourced, though aircraft-delivery delays and tight labour markets may test capacity growth. Network carriers IAG (British Airways – Vueling – Aer Lingus), Lufthansa and Air France-KLM rely heavily on trans-Atlantic routes and benefit from Asia reopening, but corporate demand lags. Budget carriers continue to capture market share and increase competition within short-haul, with Ryanair and Wizz Air passenger numbers beating pre-pandemic levels.

European Budget Airlines Seem Well Prepared for Earnings Boost

Conroy Gaynor, aviation analyst at Bloomberg Intelligence, commented: “The greater optimism on earnings for low-cost European carriers since the start of 2023 is supported by pent-up demand, potential trading-down effects and an easing of fuel prices. Ryanair, EasyJet and Wizz Air have all signalled strong bookings for the summer, which will likely be reiterated in upcoming reports, though execution is now key.

“European low-cost airlines’ strong share-price jumps at the start of the year may be reflected in anticipated upward earnings revisions despite the market underperformance that ensued. EasyJet released a fiscal 1H trading update in April — with the full report pencilled in for May — and raised profit expectations for the year ending September. Ryanair has been a top-performing peer since the pandemic and upgraded fiscal 2023 guidance (ended March) in January ahead of its 3Q results, yet new catalysts may be required.”

European Legacy Airlines Can Use Q1 Results to Show Off Summer Bookings

Gaynor continued: “European legacy airlines are set to highlight strong summer bookings in 1Q reports, especially now the profit-sapping winter is over and jet fuel prices have softened. US peers United Airlines and Delta expressed Trans-Atlantic optimism, which may read well for IAG, Lufthansa and Air France-KLM. Asia’s opening can also help restore near-full capacity.

“Europe’s three largest full service airlines IAG (which includes British Airways – Vueling – Aer Lingus), Lufthansa and Air France-KLM under performed relative indexes since their last earnings reports in February-March, despite some significant consensus upgrades being made. Strong demand and easing cost pressures looked to already work their way into share prices at the beginning of the year, with the market then moving on to contemplate banking fears, interest rates and inflation. Air France-KLM revisions have stood out as the company’s operational turnaround delivers an upbeat outlook. Turkish Airlines was ahead in the 2022 recovery, while Finnair was hit hard by Russian air space closure.”