easyJet and Ryanair results preview: budget airlines prosper despite turbulence
Budget airlines have had a good start to the year, and summer bookings are looking strong too.
easyJet profits soar
easyJet is expected to reveal annual profits surging by up to 42% when it reports full-year results on Thursday. The low-cost airline has brushed off strike disruptions and capitalized on troubles plaguing rivals.
Despite thousands of cancelled flights over the summer due to air traffic control strikes in France and Italy, easyJet forecasts full-year pre-tax profits between £570-580 million. This would be up sharply from £408 million the prior year.
Travel rebound lifts Ryanair
Meanwhile, Ryanair continues benefiting from a strong rebound in air travel demand since the pandemic lows. In the third quarter (Q3) through December 2023, the budget airline's revenues improved 23.1% year-over-year (YoY), driven by robust passenger volumes.
For the first nine months of fiscal 2024, Ryanair's traffic grew 10% YoY. The company expects full-year traffic to reach 183.5 million passengers. Ryanair's profit after tax also showed solid YoY growth through the first nine months.
The load factor, measuring percentage of seats filled, remained high at 94% during this period. February traffic numbers were also strong, with Ryanair carrying 5% more passengers than the prior year at a 92% load factor.
Guidance in focus after share price rally
While easyJet's earnings surged, guidance for the new fiscal year will be closely watched given cost pressures from industrial action and the hit from its struggling Berlin operations.
easyJet expects to book a £115 million loss from its Berlin Tegel Airport operations. Investors will also eye commentary around fuel costs, the company's bid for troubled Alitalia, and potential interest in acquiring rival Flybe.
Ryanair has taken measures to expand its fleet to 536 aircraft as of September 2023 to meet improving travel demand. However, the budget carrier was impacted by over 800 flight cancellations in February due to conflicts between Israel and Gaza.
As travel continues recovering from pandemic disruptions, easyJet and Ryanair's ability to contain costs and execute on growth plans will be key for sustaining profitability momentum.
Analyst ratings for easyJet and Ryanair
LSEG Refinitiv data shows a consensus analyst rating of ‘buy’ for EasyJet with 3 strong buy, 13 buy and 4 hold – and a mean of estimates suggesting a long-term price target of 707.50 pence for the share, roughly 33% higher than the current price (as of 13 May 2024).
Ryanair has an even more positive consensus analyst rating of ‘buy’ with 6 strong buy, 14 buy and 1 hold – and a mean of estimates suggesting a long-term price target of EUR25.60 for the share, roughly 34% higher than the current price (as of 13 May 2024).
easyJet, Ryanair and FTSE 100 year-to-date comparison
It is interesting to note that having greatly outperformed the FTSE 100, at times by over 10%, until the beginning of April, the easyJet and Ryanair share prices’ recent tumble has led to the current underperformance.
The Ryanair share price is currently flat while the easyJet share price is up around 4% year-to-date and the FTSE up by over 9% as it continues to make record highs.
Technical outlook on the easyJet share price
In April the easyJet share price hit a two-year high at 591p, before dropping by around 15% to last week’s near five-month low at 500.00p amid comments by Ryanair CEO Michael O’Leary saying that summer ticket fares will rise less than expected, negatively affecting the whole airline sector’s share price. Later in the week airline share prices recovered, though, amid a rapidly rising FTSE 100 which has made new record highs for the whole of last week.
Above the 500.00p mark, the mid-March to mid-April lows at 518.6p to 507.40p low should offer minor support.
easyJet Daily Candlestick Chart
Failure at 500.00p would have further bearish implications and put the early to mid-January lows as well as the 200-day simple moving average (SMA) at 481.60p to 475.4p on the cards.
While the early-January low at 475.4p underpins, however, the medium-term uptrend remain valid.
Only an unexpected bearish reversal and fall through the 475.4p early-January low would have negative longer-term consequences for the easyJet share price. In this scenario the September and October highs at 464.4p to 450.7p would be in sight. Slightly further down lies the mid-November high at 445.6p.
Immediate resistance can be spotted along the 55-day SMA at 543.70p and major resistance between the February and April peaks at 582.2p to 591.0p.
The April peak sits between the mid-October 2021 low and the mid-April 2022 high at 589.4p to 604.2p which remains an upside target zone for the easyJet share price.
Technical view on the Ryanair share price
The Ryanair share price, which a month ago was trading at a record high at EUR21.79, slid to last week’s EUR18.64 low amid CEO Michael O’Leary’s comments regarding lower-than-expected summer ticket fares.
This low was still made above the Ryanair share price’s January low and the 200-day SMA at EUR18.05 to EUR17.80. While this support zone holds, the medium-term bullish trend remains valid.
Ryanair Daily Candlestick Chart
Only a weekly chart close below this year’s EUR17.80 low would probably indicate a several months long sideways trading phase.
As long as the EUR17.80 level underpins, though, a retest of the April all-time high at EUR21.79 remains on the cards. A rise above this level would engage the EUR25 region.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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