European airlines see travel withstanding consumer pressure for now


By Sarah Young and Klaus Lauer

LONDON (Reuters) – British Airways owner IAG, Europe’s biggest carrier Ryanair, and rival easyJet said travel demand was holding up, calming concerns that pressure on household budgets could stall the aviation recovery from the pandemic.

Australia’s Qantas Airways Ltd also said on Thursday it was seeing consumers willing to pay higher fares despite rising inflation and interest rates.

IAG shares rose as much as 10% after an unscheduled announcement on Thursday to report better-than-expected earnings for its summer quarter and a confident outlook. Meanwhile, Ryanair said its bookings for the northern hemisphere fall semester and Christmas holidays are above pre-COVID-19 levels and it expects average fares to rise more than expected through the end of March.

In Europe, most airline shares have plunged in the past six months, some by as much as 50%, on concern that rising household bills will dampen appetite for travel.

But airlines injected optimism into the market on Thursday.

IAG, which also owns airlines Aer Lingus, Iberia and Vueling, said advance bookings remain at expected levels for this time of year “with no signs of weakness”.

Johan Lundgren, chief executive of easyJet, which had previously issued forecasts for its full-year results, was more cautious, saying there was “uncertainty” but the low-cost carrier also said there was reason for optimism.

“Despite the struggles households are having, we still know that vacations and travel top the list when people are able to prioritize what they want to do with their disposable income,” he told reporters.

For Britain’s October school holidays and Christmas week, easyJet said ticket sales exceeded pre-pandemic levels and load factors, a measure of full seats, for winter bookings and prices. they were solid.

Analysts noted that the dollar’s strength against the pound and euro of late has made it cheaper for American visitors to Britain and Europe, a particular boost for IAG, which has a large exposure to the transatlantic market.

Ryanair chief executive Michael O’Leary said demand appeared to be supported by savings accumulated during the pandemic, but gave a warning about how long that could last, saying he expects customers’ disposable income to take a hit. by increases in interest rates and the cost of living even more in the northern hemisphere winter.

Hargreaves Lansdown equity analyst Sophie Lund-Yates echoed this, saying the IAG update was “a very welcome surprise, but whether you can keep the background music lively is another question entirely.”

(Written by Sarah Young; Editing by Emelia Sithole-Matarise)

Copyright 2022 Thomson Reuters.


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