Home Business EasyJet Shares Are In Crisis, And Could Be Forced Down Further In Q4

EasyJet Shares Are In Crisis, And Could Be Forced Down Further In Q4

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After cutting flights amid an intense staffing crisis, are easyJet (LON:EZJ) shares finally out of the runway?

EasyJet Shares Are In Crisis

Charles Archer, Financial Writer for IG explains:

EasyJet (LON:EZJ) may market itself as a low-cost airline, but the FTSE 250 airline’s shares have been anything but cheap, regardless of when investors hopped in. The easyJet share price is down 27% over the past month, 48% in a year, and 66% over the past five years to 393p today.

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Q1 2022 hedge fund letters, conferences and more

easyJet’s summer update made for grim reading. The airline warned that ongoing operational challenges, including ‘air traffic control delays and staff shortages in ground handling and at airports,’ and the ‘very tight labour market…compounded by increased ID check times’ is increasing ‘aircraft turnaround times and delayed departures which have a knock-on effect resulting in flight cancellations.’ Attempting to put on a positive spin, it noted that it will operate 140,000 flights carrying 22 million passengers in Q3, a passenger capacity 550% higher than in Q3 2021. And the company enthuses that ‘demand for travel has returned with April and May passengers seven times the same months last year.’ But in reality, easyJet cut 4,000 flights this quarter, reducing capacity to around 87% of pre-pandemic levels. Last month, it even began removing seats to reduce cabin crew staffing requirements. And it’s reduced Q4 capacity to 90% of pre-pandemic levels, a seven-percentage point fall from previous estimates. In other words, it’s cutting 11,000 flights affecting 1.5 million customers at the height of the most important season of the year.

But despite the issues, the airline has a strong long-term investment case. Staff shortages are not unique to easyJet, and it can be argued that they will benefit from increased pricing power as its rivals are also forced to cancel flights. And with easyJet sitting on £4.4 billion of capital, it retains sufficient financial firepower to outlast the current problems. It could even grow market share if smaller competitors collapse. But with the wings of the summer recovery clipped, easyJet shares may fly lower near term."

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