Citi downgraded Wizz Air and Lufthansa in a note to clients on Wednesday, citing a number of factors, including engine bottlenecks and pricing pressure in the short-haul segment.
The bank said it reckons pricing will lose momentum in short haul compared to long haul and that Ryanair is well-positioned to outperform on pricing due to its network flexibility.
Citi also noted that the “recent engine-related bottlenecks will impact circa 4% of short-haul capacity” and that Wizz is the most exposed, with around 23% exposure of current capacity.
As a result, Citi downgraded Wizz to Sell due to the impact on capacity ramp-up resulting in unit cost pressure, while the investment bank also downgraded Lufthansa to Neutral due to “downside risk to its 2024 margin target.”
Overall, international travel demand remains solid despite the end of the summer season. In August, Lufthansa lifted its full-year profit outlook, while EasyJet said in its October 12 trading update that it will report a record Q4 profit before tax of between £650 and £670 million.
Wizz Air shares fell over -4% Wednesday, adding to its year-to-date decline, which now stands at -13.91%.
By Sam Boughedda