British Airways owner International Consolidated Airlines Group PLC (LON:IAG), Ryanair Holdings PLC (LON:RYA), and Wizz Air Holdings PLC (LON:WIZZ) will soar as demand outstrips supply on Europe’s airlines next summer, Deutsche Bank predicts
The German investment bank ranked the three as its “most preferred” European airlines, upgrading budget flier Ryanair to ‘buy’, and maintaining the recommendation for IAG and Wizz.
“We see upside risk on intra-European pricing, thanks to demand outstripping supply in Summer 2020,” said the Deutsche analysts, adding that this would be particularly useful for low-cost carriers like Ryanair.
The last year saw a low single-digit rise in demand, and as for next year, airlines have been guiding cautiously on passenger capacity for 2020, in particular Ryanair due to delays from the grounding of the Boeing 737MAX.
“It wouldn't be unreasonable to expect almost 4% in airline demand (RPK) growth,” they said, concluding “as a result, we see 2020 as a year in which intra-European demand for air travel might more materially outstrip supply, resulting in upside surprise on pricing”.
Deutsche said that while it doesn’t expect the airlines as a group to materially re-rate next year, IAG, may look up “if Brexit clarity emerges & ownership issues get resolved”, as would Wizz, “if the market more appropriately prices its better quality growth”.
Furthermore, the investment bank noted that over the last four months, European airline share prices have already moved to price some of this in, rising 30%.
Shares notched up more gains in mid-morning trading on Thursday, led by a 2% rise to 557.2p for IAG, as well as a 1% increase to 3,886p at Wizz and 1% hike to 14.2p at Ryanair.