EasyJet shares were downgraded on Thursday at Bernstein citing rising carbon costs and risks to fares, but several key data points may signal strong demand.

Bernstein analyst Daniel Roska downgraded easyJet to Market perform from Outperform with a 550p price target. The airlines shares currently sit at 514p on Friday morning.

Roska noted that the budget airline has improved commercially through the pandemic, with ancillary sales per passenger almost 70% above pre-pandemic levels. Additionally, its holidays business has become a meaningful profit contributor to the firm.

Meanwhile, productivity improvements are expected to improve more summer flying on the same number of planes.

So far, several positive comments stated by the analyst. However, Bernstein states that its still-to-come capacity restoration presents risks to fares into next winter. Furthermore, easyJet must still contend with rising carbon costs starting in 2024. The few considerable downsides was enough to reduce easyJet’s shares on Thursday.

On the other hand, easyJet recently raised its full year profit forecasts following strong demand figures and record bookings in January.

Looking at recent demand figures, Twitter mentions saw a significant jump over the Christmas period, as more people had time off and looked to travel over the festive period. This was evident from easyJet’s Q1 trading update where it reported they had flew 5,433 passengers in December 2022, increasing from 3,683 in December 2021.

Our sentiment tracker shows consumer happiness with easyJet has leaned neutral to positive over the last month driven by its easyJet Holidays business as mentioned by Roska.

EasyJet was recently upgraded to Buy from Hold at HSBC on Wednesday. In addition, earlier this month Morgan Stanley initiated the group with an Equal Weight rating.