A quartet of European airlines have had their target prices cut by HSBC as the investment bank said the coronavirus outbreak presented “a new challenge” for the carriers.
In a note on Tuesday, the bank said demand for air travel across Europe had “weakened broadly” since the disease arrived on the continent earlier this year and that it was currently “not possible to know the extent, scale and duration” of the decline.
“We expect share prices to be highly volatile on profit warnings and news reports on airline reactions”, HSBC said, adding that while they thought demand would recover, they could not be certain when this will occur.
As a result of the downturn, the bank cut easyJet PLC (LON:EZJ) to 1,500p from 1,800p, British Airways owner International Consolidated Airlines Group SA to 650p from 750p, Ryanair Holdings plc (LON:RYA) to €18 from €19 and Wizz Air Holdings PLC (LON:WIZZ) to 3,200p from 3,800p.
HSBC is predicting a 2.5 point drop in load factors for the airlines during the crisis in addition to a 3 point reduction in capacity as flights are cancelled and passengers avoid travelling.
However, the bank retained its ‘buy’ ratings on easyJet, Ryanair and IAG and its ‘hold’ rating for Wizz, saying that they will maintain a “positive stance” towards the airlines on the expectation of demand recovery in 2021.
Shares in easyJet were up 4.7% at 1,112p in mid-morning trading, while Ryanair climbed 4.3% to €12, IAG rose 7.3% to 464.9p and Wizz Air increased 4.9% to 3,487p.