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Aviation shares plummet despite optimistic Ryanair and Wizz Air updates as investors weigh consumer health
- WizzAir unveiled plans to increase capacity as it posted core profit of £321 million
- Ryanair saw a record high in October as passenger numbers grew by 14% compared to 2019
- But airline stocks have fallen across the board as investors weigh future demand
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Shares of London-listed airlines fell today as concerns about consumer strength outweighed positive updates from Wizz Air and Ryanair.
EasyJet and British Airways owner IAG Shares had fallen by 4.4 and 1.4 percent respectively by noon, while Wizz Air Shares fell 2.5 percent and rebounded after a whopping 6 percent drop in early trading.
The drop came despite Wizz Air announcing plans to increase its capacity by 35 percent amid confidence in its outlook and Ryanair, which is no longer listed in London, set a record in October as passenger numbers grew 14 percent. from pre-Covid levels to 15.7 million.
WizzAir unveiled plans to increase capacity as it posted core profit of £321 million
Fears of an impending recession and a sharp drop in consumer confidence have dampened enthusiasm for the improved fortunes of European airlines.
Wizz posted core earnings of €374 million (£321.6 million) for the quarter from June to September, rebounding from a loss of €154 million in the previous three months, plagued by staff shortages at airports leading to flight cancellations .
Chief executive Jozsef Varadi told investors the airline “sees no indication of a decline in demand, so we are confident,” adding it has “taken steps to mitigate rising costs.”
However, he acknowledged that “the macroeconomic backdrop remains challenging and consumer uncertainty has increased.”
The positive forecast was in line with the outlook of other European airlines, which have shown continued growth in ticket sales.
Airlines have had a difficult road to recovery from the pandemic, although profitability and passenger numbers have improved in recent months.
Rising costs, particularly related to fuel and labor, were exacerbated by understaffing at the airport, leading to enforced flight limits by 2022.
Wizz Air’s Varadi said: “A lot has been done in the airline industry to address the important issues that arose early in the calendar year 2022.”
IAG remains about 73.5 percent lower than its pre-Covid 2020 peak, while EasyJet and Wizz Air are about 73.3 and 63.1 percent lower, respectively.
Following Wizz Air’s half-year results on Wednesday, analysts at Peel Hunt said: “With rapid fleet growth and a pivot to the Middle East, the group will continue to expand rapidly and use its low cost base to increase market share.
“At 1,735 pence, the stock is trading at less than 15/5x FY24/5E P/E, which we consider way too low.”
EasyJet and IAG shares were given some reprieve earlier this week, amid reports that the latter airline giant was preparing to make an offer for Europe’s largest airline based on passenger numbers.
Michael Hewson, chief market analyst at CMC Markets UK, said: “As easyJet was the target of a reported bid from Wizz Air earlier this year and is struggling to turn a profit, it’s only natural that its shares have seen some interest as they only recently traded at 11-year lows.
“IAG has had a strong month in terms of price, an increase of more than 25 percent so far”