Ryanair, easyJet and Wizz Air shares beaten down by aviation struggles

After two years of pandemic restrictions, the aviation industry was meant to be soaring this summer. However, staff shortages and rising oil prices have continued to cause disruption, especially for budget carriers like easyJet, Ryanair and Wizz Air.

As budget carriers, Ryanair [RYA.L], Wizz Air [WIZZ.L] and easyJet [EZJ.L] have been the airlines most susceptible to the recent aviation industry struggles. Through to 8 July, the Wizz Air share price has fallen 55.6% year-to-date, the easyJet share price has sunk 32.3% and the Ryanair share price has dropped 33.7%.

Particular struggles have been caused by staff shortages at airports, due to the mass redundancies made during the pandemic. This has led to many flights being cancelled, while both London Gatwick and Amsterdam Schiphol airports have introduced flight caps. Nonetheless, despite these recent struggles, there are also signs that demand is strong, which may boost these airlines in the long term.

Wizz Air: suffering the rising oil price

Year-to-date, Wizz Air has suffered the worst out of the three airlines. This is mainly because Wizz Air was unhedged when the oil price rose sharply after Russia’s invasion of Ukraine. Therefore, costs at the group have soared to unsustainable levels, as highlighted in its recent full-year 2022 trading update. Here, the company reported a net loss of €642.5m, which was higher than its full-year 2021 loss.

However, there are some positive signs ahead. For example, according to analysts at Goodbody earlier this year, “management has sensibly capitulated on its no-hedging policy”, meaning that around 36% of its planned jet fuel consumption between April and August is now hedged. This should allow the company to control costs slightly better.

At the same time, last month, the group saw passenger traffic of more than 4.3 million, which is the highest the airline has seen in the past seven years. It is also almost triple the figures recorded in June 2021.

Mixed investor sentiment has also led to mixed analyst ratings for the airline stock. According to MarketBeat, Wizz Air currently has three ‘buy’ ratings, six ‘hold’ ratings and two ‘sell’ ratings. It also has an average price target of 3,725p, implying an upside of 100.4% from the close on 8 July.

easyJet: dealing with the disruption poorly

While each of the airlines has struggled with the recent disruption, easyJet has dealt with it awfully. In fact, out of any airline, easyJet has cancelled the highest number of flights. This is likely to lead to reputation damage. It has also led to the airline scaling back its forecasts for the future — in the current quarter, it expects capacity of 90% of 2019 levels, down from previous expectations of 97%.

Amid this turmoil, the company’s COO Peter Bellew has quit the company. This news added further downward pressure to the easyJet share price, as a strong management team is essential right now for weathering the disruption.

There are several positives for easyJet, however. For instance, as of the end of March 2022, the group had over £3bn in cash. Net debt also stood at around a relatively low £600m, down from £910m in September 2021, highlighting the company’s strong financial position. Furthermore, easyJet has hedged around 71% of its fuel for the second half of FY2022, which should greatly reduce its costs.

Analysts are extremely confident about the future of easyJet. According to the Wall Street Journal, the group has 15 ‘buy’ ratings, two ‘hold’ ratings and just one ‘sell’ rating. Its median price target is 689p, implying an upside of 83% on its 8 July price.

Ryanair: the most resilient airline

So far this year, the Ryanair share price has been the hardiest. This has been driven by more resilient results than the other two airlines, alongside the fact that the group has hedged 80% of its fuel consumption for the forthcoming financial year. Ryanair reported revenues of €4.8bn in full-year 2022, up 193% year-over-year. Net loss also totalled ‘only’ €355m, down from over €1bn the year before.

There are still many challenges facing the group, however. For example, staff at Ryanair are now threatening strike action, which has the potential to see flights cancelled. Michael O’Leary, CEO of Ryanair, also recently stated that the cost of a plane ticket is “too cheap”. However, an increase in the price of a plane ticket may reduce customer numbers.

Analysts remain extremely confident about Ryanair stock, however. According to MarketScreener, the group has 17 ‘buy’ ratings and two ‘hold’ ratings. It has an average price target of €18.24, implying an upside of 53% on the 8 July closing price.