Budget airlines stocks led the FTSE 250 index on Friday as demand for the sector rose. Wizz Air (LON: WIZZ) and EasyJet (LON: EZJ) share prices jumped by over 3%, continuing the recovery that started in 2022.
Rising flying demand
The European economy has recovered at a faster pace than what most analysts were expecting. As I wrote in this report, the Euro Stoxx 50 index has outperformed its American peers. Indices like the FTSE 100 and CAC 40 have jumped to a record high.
The services industry has led this recovery as tourism helps. This explains why budget airline stocks like EasyJet and Wizz Air have done well in 2022. Their financial results showed that demand remains robust despite the ongoing cost of living crisis.
Financial results by Wizz Air showed that its operating loss narrowed to 155 million euros in the final three months of the year. The company had lost 213 million euros in the same period in 2021. Revenue more than doubled to over 911 million euros.
The same view was shared by EasyJet, which said that its pre-tax loss came in at 133 million pounds from the previous 213 million. Its revenue jumped as the number of customers during the quarter rose to over 20.2 million.
As a result, analysts have been upbeat about the industry. As I wrote here, analysts at Deutsche Bank upgraded the company’s stock in their most recent report. Similarly, analysts at JP Morgan, Barclays, and Deutsche Bank have upgraded their outlook for Wizz Air recently. The two companies will likely be profitable this year.
UK retail sales
A likely reason why EasyJet and Wizz Air share prices jumped is because of the strong UK retail sales numbers. Sales of goods sold in shops fell by 0.5% on a MoM basis, a better reading than expected.
While flying does not fall part of retail sales, analysts interpreted the numbers to mean that consumer confidence is rising. Highly confident consumers tend to shop and fly more. In a note, an analyst at Deloitte said:
“The retail industry is entering a transitionary period as inflation eases and consumer confidence shows early signs of improvement.”
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