RYAAY - European airline stocks are viewed cautiously at Deutsche Bank with fares weakening

2023-07-12 08:19:19 ET

Deutsche Bank turned cautious on the European airline sector on Wednesday with a series of rating downgrades and price target cuts.

Analyst Jaime Rowbotham pointed to some weakness in the firm's fares data, with 60-day out prices for travel in August having screened ~2% down year-over-year on average, and walk-up fares in June ~6% down year-over-year.

"While the idea of a slowdown did not resonate with the airlines in our recent pre-close conversations, we are nonetheless exercising some caution. For 2023, some minor trimming to our Sept-Q forecasts is more than offset by upgrades to the Jun-Q ahead of a strong upcoming reporting season, with our Dec-Q assumptions already sufficiently prudent."

Looking ahead to 2024, Deutsche Bank said it assume fares will be down 6% year-over-year vs. flat before, which has resulted in a material cut to the firm's profit forecasts which now sit ~20% below consensus on average.

The firm lowered its rating on Air France-KLM SA ( OTCPK:AFRAF ) to Hold from Buy. The rating on International Consolidated Airlines Group S.A. ( OTCPK:ICAGY ) was also clipped to Hold from Buy. Price target cuts were also fired off by Deutsche Bank on Buy-rated easyJet ( OTCQX:EJTTF ) to 585 pence from 635 pence, Buy-rated Deutsche Lufthansa AG ( OTCQX:DLAKF ) to €11 from €14.5 to E11, Buy-rated Ryanair Holdings plc ( NASDAQ: RYAAY ) to €21 from €22.5, and Hold-rated Wizz Air Holdings Plc. ( OTCPK:WZZAF ) to 2850 pence from 3700 pence.

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