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easyJet and other budget carriers to benefit from rival cost-cutting, says Citi

Analysts said the orange and white liveried carrier is particularly poised to take advantage of "retrenchment” at Franco-Dutch airline Air France-KLM and German carrier Lufthansa

easyJet plc - easyJet and other budget carriers to benefit from rival cost-cutting, says Citi

easyJet PLC (LON:EZJ) is poised to benefit from a “retrenchment” among rivals Air France-KLM and Lufthansa, according to analysts at Citi.

In a note on Tuesday, the investment bank upgraded the budget carrier to ‘neutral’ from ‘sell’, noting that the coronavirus pandemic has “altered the landscape” of the European airline industry.

READ: Ryanair, EasyJet 'buys' ahead of travel easing, says HSBC

“The recovery path might vary across the sector”, analysts said, although they forecast that supply rationalisation will be “the main positive outcome from the pandemic” with “a potential pricing power in the coming years”.

“However, on costs the industry is facing structural headwinds such as environmental charges and route charges. Against this mixed backdrop, we believe investors should spread their wings across low cost and legacy carriers for winners”, Citi said.

Aside from their upgrade of easyJet, the bank said they preferred Ryanair Holdings PLC (LON:RYA) and Wizz Air Holdings PLC (LON:WIZZ) among the low-cost airlines and British Airways owner International Consolidated Airlines Group SA (LON:IAG) among legacy carriers.

Shares in easyJet jumped 2.5% to 998p in mid-morning trading, while Ryanair rose 1.6% to €16.90, Wizz Air climbed 1.8% to 5,066p and IAG was up 1.4% at 200.6p.

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