EasyJet Ready to Announce Takeoff?

While travel in Europe has surged following the end of lockdowns, the price of one of the region's premier budget airline's shares hasn't taken flight yet.

Getting Over the Hump

Since the start of the year, EasyJet's share price has remained pretty stable. Revenue has increased as the company ramps back to full capacity from the lockdowns, but it has also faced cost problems, particularly around fuel. Rising interest rates and a stagnant European economy dampen the outlook (although rival Ryanair has a much more upbeat outlook for the industry). Now airlines have to worry about pending strikes at air traffic control (ATC) in the EU, which could disrupt flights and lead to losses for airlines that might have to refund passengers on cancelled voyages.

Despite the risks, the consensus is that air travel will see a strong year in 2023. The summer travel season is particularly relevant for EasyJet as a budget airline, which is expected to remain strong despite worries about a pending recession. Europe is expected to see 2.2B passengers, around 92% of the 2019 peak, and up from 81.1% last year, which still consisted of some of the aftermath of the pandemic.

What to Look Out For

EasyJet will report its Q3 trading update on Thursday with its latest passenger and traffic data but typically does not release financials. An outlook for the rest of the year can be expected with how much capacity compared to pre-pandemic. Due to the ATC issues, the airline has already cancelled 1,700 flights for the peak summer seasons, so investors are likely to be very interested in how that will affect forward guidance. EasyJet managed to avoid facing strikes at its Gatwick hub that are dragging on other airlines by offering better pay to baggage handlers.

The fuel cost has been a headache for airlines over the winter and could be an issue that can raise some concerns through the coming winter. Although EasyJet doesn't routinely comment on its fuel hedging during a trading update, this time might be an exception as fuel prices have been coming down recently, and there is an expectation that they could rise again later in the year. Finally, the trading update could be an opportunity to announce further route increases that could support revenue expansion.

EasyJet in Triangle Following H&S

The stock price of EasyJet has been detained in a narrowing range, resembling a triangle pattern. Triangles typically break towards the predominant direction of the trend: up; but rarely, they also break into the opposite direction before further clarity can be provided.

If bearish price action can be sustained above 440p, EasyJet may take a flight past the 2023 peak of 535p and towards the measured-move projection of 590. Conversely, losing the base will open up 430p in the short term, with a breakdown provoking additional bets to the next major support settled at 375. A slide under 320 would probably invalidate the inverse head-and-shoulders pattern formed at the market bottom.

Source: SpreadX EasyJet

Key Takeaways

EasyJet's share price has remained stable despite increased revenue and the company's efforts to return to full capacity after lockdowns. However, rising fuel costs, pending strikes at air traffic control, and a stagnant European economy dampen the outlook. Despite these risks, the consensus is that air travel will have a strong year in 2023, especially during summer. EasyJet's Q3 trading update will provide insights into passenger and traffic data, the impact of ATC issues, and potential strategies to address fuel cost concerns. The update may allow the airline to announce further route expansions to support revenue growth.