European Airlines Will Recover 70% Of Their Sales In Mark1199. IAG loses 20% from June highs and is still buying. BofA foresees that this summer the capacity offered will be at levels of 50%.
These are bad times to explain that the recovery of the community airline sector will come at the end of this year, taking into account the falls in recent weeks due to the consequences that the Delta variant is causing in Europe .
But this is what the market consensus foresees. Analysts believe that in the fourth quarter of the year the group of six European companies -IAG, Air France-KLM, Lufthansa, Ryanair, easyJet and Wizz Air- will operate at 73% of their capacity and will obtain 70% of the revenues that they had in 2019 , just before the pandemic broke out.
This is what the investment bank Bank of America collects in a recent report, which is more optimistic than the market as a whole and considers that these two figures must be raised to 80% of the available seats (following the ASK ratio used in the sector) and will obtain 77% of the income they achieved in the last quarter of 2019.
If this quite encouraging horizon is fulfilled, the theory that the current falls in the stock market represent a clear buying opportunity is reinforced. However, analysts are still clearly positioned in favor of IAG and Ryanair , the only two firms of the six possible that maintain a purchase recommendation and that will reach the year 2023 with profits that will be around, in both cases, 1,800 million euros .
“Our air booking data reflects that occupancy in Europe has increased to 58% levels over those that occurred in the same period of 2019, although the return of flights with the US is still afflicted. Operating cash flow should benefit from the recovery of reserves and would allow them to reduce the current high indebtedness.
Our forecast is that for the summer quarter (third of the year, from July to September) their income will be at 52% of pre-Covid levels “, point out the analysts of BofA. Over the summer months, experts predict capacity levels of 79%. European Airlines Will Recover 70% Of Their Sales In Mark1199.
The Spanish-British holding company will be very saddened by the departure of British Airways and Air Lingus, which will halt the achievements that Iberia and Vueling are obtaining. That is what they consider from Credit Suisse, where they believe that by the month of July the airline will be at a capacity of 40% over the 2019 figures, but taking into account that Iberia and Vueling will have already achieved percentages of 65% to 70% .
“We recently forecast a breakeven for IAG in the third quarter of the year, but we have downgraded our estimate to losses of 345 million euros caused by British Airways and Air Lingus”, for whom they estimate losses of around 850-900 million euros from July to September. This would imply that the Spanish part could be in profits of about 500 million euros before October.
The key to the recovery of air traffic passes, according to different analysis houses, through long-haul flights . Credit Suisse believes that by 2022 IAG’s offered capacity will reach levels of 80% -85% and by 2023 it will only be 10% below the old normal.
Looking ahead, from Renta 4 its analysts consider that in 2024 “supply will have recovered pre-Covid levels”, despite the fact that demand will still remain 10% below. The reason for this is the slow recovery that business travel will suffer.
IAG presents results on August 7 . The market consensus expects losses of more than 1,000 million euros, similar to those of the first quarter of the year and which will be halved in the third, according to the consensus collected by Bloomberg.
After the latest falls, which only in the last week amounted to 7% and which led the firm to lose 2 euros in the last session, on average IAG has an upward potential of 35%, up to 2.67 euros per action. However, houses like Bernstein, with levels of 2.93 euros, HSBC (at 2.81 euros, similar to Renta 4), or Stifel, which goes up to 3 euros, see potential even higher than 50% twelve months ahead.
Of course, the airline is still very far from the 5.11 euros at which it was trading on February 19, 2020 (discounting the capital increase), just one day before the Covid-crash caused the collapse of the market of values. European Airlines Will Recover 70% Of Their Sales In Mark1199.
Falls in the sector
The losses of the last weeks are not only visible in IAG, its European colleagues follow the same line. In fact, easyJet is the one that fell the most in the last week, 9%, and in the month of July, with falls of 11%. Air France-KLM is the third most sold in the last four days, after IAG, a decrease of close to 6% per week, 9% in the month of July and 20% from the highs of 2.4 euros in June . The sector has fallen on average 16% since then.
In the case of Wizz Air, the weekly decline is 5%, 7% during the month of July. And for Ryanair we are talking about a 2% drop in the last sessions, in total more than 3% per month. They are the only ones that are fully recovered from the virus. Deutsche Lufthansa lost 4% on the week. A little more than 2% if we take into account its monthly evolution. European Airlines Will Recover 70% Of Their Sales In Mark1199.