Analysts at Deutsche Bank downgraded British Airways parent International Airlines Group and low-cost carrier Wizz Air from ‘buy’ to ‘hold’ on Thursday, stating they were now pricing in “a more turbulent outlook”.
Deutsche Bank said it now sees “a less positive outlook” for EU airlines, which have rallied more than 20% from lows reached on 7 March in the aftermath of Russia’s invasion of Ukraine.
The German bank said its key concerns were a potentially weaker EU consumer, due to inflationary pressures on disposable income, and elevated oil prices.
“We don’t expect the airlines to be able to pass all of the fuel cost headwind we now envisage on to customers, especially next year when those headwinds look set to be greater and by which time we think some of the pent-up demand for travel post the Covid-19 pandemic will have already played out,” said DB.
As a result, Deutsche lowered its 2022 and 2023 underlying earnings forecasts for the sector by 15% on average and slashed its target prices by 20% on average, with IAG’s dropping to 155.0p from 220.0p and Wizz Air’s target being cut from 5,450.0p to 2,900.0p.
