Analysts believe that the ramp up in intra-European air travel will take longer because of the slow rollout of vaccinations across the continent and the cautious commentary of the low-cost carriers in their recent quarterly results.
However, the bank said many investors “remain sanguine” on the sector given that many European countries could vaccinate around half of their citizens by mid-2021 and there appears to be significant pent-up demand for leisure travel.
Nonetheless, another two quarters of cash burn is not helpful for balance sheets and equity valuations.
In fact, analysts cut the target prices by 14% to 710p for easyJet, by 7% to €16.25 for Ryanair and by 2% to 5,600p for Wizz Air.
Wizz Air remains the top pick in the sector as JP Morgan still expects a 21% potential return, while Ryanair is facing a challenging six months after full-year passenger numbers are expected to come in at the bottom of the 80-120mln forecast.
While both of these have a healthy liquidity position, easyJet’s is “ok”, the analysts said, and only as long as European leisure travel meaningfully picks up in the quarter to September 2021.
Shares in easyJet rose 2% to 790p, Ryanair advanced 3% to €15.60 and Wizz Air added 4% to 4,812p on Wednesday at noon.