Airline shares sink despite upbeat Ryanair and Wizz Air updates

London-listed airline shares fell today as concerns about consumer strength outweighed upbeat updates from Wizz Air and Ryanair.

EasyJet and British Airways-owner IAG shares were down 4.4 and 1.4 per cent, respectively, by midday, while Wizz Air shares were down 2.5 per cent, recovering after falling as much as 6 per cent in early trading.

The decline came despite Wizz Air announcing plans to grow its capacity by 35 per cent amid confidence on its outlook and Ryanair, which is no longer listed in London, posting a record October as passenger numbers grew 14 per cent on pre-Covid levels to 15.7 million.

WizzAir revealed plans to boost capacity as it posted core earnings of £321m

Fears of a looming recession and a sharp decline in consumer confidence have dented enthusiasm for the improved fortunes of Europe’s airlines. 

Wizz posted core earnings for June to September quarter of €374million (£321.6million), bouncing back from a €154million loss recorded in the previous three months, which were plagued by staff shortages at airports that led to flight cancellations.

Chief executive Jozsef Varadi told investors the airline is ‘seeing no indication of a drop in demand so we remain confident’, adding that it had put in place ‘measures to mitigate’ rising costs.

However, he acknowledged that ‘the macroeconomic backdrop remains challenging and uncertainty for consumers has heightened’.

The upbeat forecast chimed with the outlook from other European airlines, which have posted continued growth in ticket sales.

Airlines have had a rocky road to recovery from the pandemic, though profitability and passenger numbers have improved in recent months.

Soaring costs, particularly with regards to fuel and labour, have been compounded by insufficient airport staffing leading to enforced limits on flights at times in 2022.

Wizz Air’s Varadi said: ‘Much has been done within the aviation industry to address the significant issues that were a feature early in the 2022 calendar year.’

IAG remains roughly 73.5 per cent off its pre-Covid 2020 peak, while EasyJet and Wizz Air are down around 73.3 and 63.1 per cent, respectively.

Following Wizz Air’s half-year results on Wednesday, analysts at Peel Hunt said: ‘With rapid fleet growth and a pivot to the Middle East, the group will continue to expand quickly, using its low cost base to increase market share.

‘At 1,735p, the stock trades at less than 15/5x FY24/5E P/E which we see as far too low.’

EasyJet and IAG shares were handed some reprieve earlier this week amid reports that the latter aviation giant was preparing to make an offer for Europe’s biggest airline by passenger numbers.

Michael Hewson, chief market analyst at CMC Markets UK, said: ‘Given that easyJet was the target of a reported bid from Wizz Air earlier this year and is struggling to turn a profit, it’s only natural that its shares have seen some interest given that they were only recently trading at 11-year lows.

‘IAG has had a strong month share price wise, up over 25 per cent month to date’