Ryanair in Focus As UK-Listed Airlines Report Losses

Wizz-Air and EasyJet's subdued results and outlook for the latest quarter could be a sign that the budget airline industry in Europe is facing another challenging year.

A Sign of Challenging Times Ahead?

Wizz Air, the UK-listed European budget airline Wizz Air, reported a return to losses in the final quarter of 2023, with a net loss of -€105.4 million compared to a profit of €33.4M million in the same period the year before last. This came despite increases in both revenue and passenger numbers as the airline faced rising operating costs. While unit costs decreased, operating profits fell extensively due to two major issues: lost capacity from the conflict in Israel and the ongoing grounding of Airbus A320neo aircraft to address engine reliability problems. In response, Wizz Air has already paused new hiring until summer, when demand may recover. Additionally, the airline aims to resume services to Israel.

EasyJet is also facing pressure from the ongoing Israeli-Hamas conflict, resulting in a £40M loss for the final quarter of last year. However, its share price rose following its trading update on Wednesday despite registering slower passenger number growth compared to Wizz Air (14% for EasyJet versus 22% for Wizz). EasyJet did record a loss, similar to the prior year. A key differentiating factor between the airlines could be attributed to fleet composition: Airbus A320neo aircraft currently account for approximately 21% of EasyJet's fleet (although it has 477 on order). Wizz Air has the highest proportion of A320neos at around 64% of its total aircraft. This required Wizz Air to lease additional planes to maintain capacity, as some A320neos were temporarily removed from service for scheduled inspections.

Will Ryanair be the Exception?

RyanAir presents a potential exception to the budget airlines in Europe as it prepares to report its fiscal third-quarter earnings on Monday. Whilst the airline does operate flights to Israel, this destination does not constitute a major proportion of its network, and services will resume from February onwards. The key difference, however, may be in RyanAir's fleet composition: notoriously, the carrier relies upon Boeing 737 aircraft. It has yet to take delivery of any 737 MAX models and thus has avoided any groundings resulting from the door sealing incident experienced by Alaskan Airlines earlier this month. On the other hand, delays in the delivery of new aircraft are causing issues for the business, as it was forced to reduce capacity due to a lack of planes. Nonetheless, this news has likely already been factored into market expectations ahead of the forthcoming financial results.

EasyJet Post-Flag Pattern

The presence of a rising flag combined with a bottom at 350 and the recent attempt at breaking past the 2023 peak at 533 can be considered a positive signal for further upside. The continuation of the trend suggests an extension at the 600 handle when measured from the breakout point near 420. Technically, the measured-move target can still be expected while trading above there. However, if bulls lose the swing at 475 and 445, the chances of invalidation will increase. Conversely, maintaining the 500 round support will act in their favour.

Source: SpreadEx EasyJet

Key Takeaways

Recent earnings of budget airlines operating in Europe indicate a challenging year ahead. Wizz Air reported losses due to rising costs and lost capacity from the Israeli conflict. EasyJet also recorded losses due to the Israeli conflict but saw its share price increase due to a reduced vulnerability by the grounding of Airbus A320neo aircraft. Meanwhile, the issue does not significantly affect RyanAir as it relies on Boeing 737 aircraft. While RyanAir has suffered from aircraft delivery delays, this was likely factored into market expectations.