Berenberg19 Oct 2021 09:34
** Berenberg refreshes its bottom-up capacity model for the
European airlines, as it sees leisure leading the way, with 2022
looking promising for shorthaul pricing (estimates shorthaul
capacity at 85% of 2019 levels in 2022)
** Although not in its base case, the broker says that
airline failures leave potential for further supply cuts in 2022
and potential upside to pricing and improved market
consolidation
** With adoption of the EU travel pass enabling more evenly
spread demand the competitive overlaps among low-cost carriers
are beginning to reverse, it adds
** Berenberg says significant downsizing by Alitalia and
Norwegian should benefit the competitive environment and pricing
on both Ryanair RYA.I and easyJet's EZJ.L network in 2022
** The broker expects the UK's remaining disproportionate
travel requirements to be removed by the summer of 2022, and to
benefit easyJet the most, it ups the British airline to "buy" as
it sees the company well placed to benefit from a stronger
pricing environment in 2022
** The broker says that changes to EU Emissions Trading
System (ETS) rules and carbon credit price inflation will make
carbon costs more onerous than previously anticipated
** Berenberg up Lufthansa to "hold" and reiterates "sell"
rating on Air France KLM AIRF.PA , saying that despite the
risks, ticket price increases should be able to make up for
credit cost inflation for both companies
** The broker cuts Wizz Air WIZZ.L to "hold" as its
valuation premium versus Ryanair looks stretched
** It also downgrades IAG to "hold", given heightened equity
dilution risk which may weigh on shares early next year
** Adds Ryanair remains Berenberg's top pick, as it expects
the balance sheet of Europe's biggest airline should weather any
difficulties in winter while the arrival of c60 MAX aircraft
will enable it to aggressively take share in summer 2022