BoA names EasyJet and IAG 'top picks' ahead of summer pick up in capacity

Analysts at Bank of America named IAG and EasyJet as their 'top picks' among European airlines in anticipation of a sharp pick up in flights over the summer.

So although they trimmed their revenues projections for companies in the sector by an average of 3% - due to a slower ramp up than in the States - they still saw scope for a summer inflection point with capacity seen at about 65% of 2019 levels.

European airlines meanwhile were planning to fly at approximately 80% of their 2019 capacity schedules over the summer quarter, versus the 30% flown between January and May.

Yet shares in the sector were up by just 6% year-to-date, underperforming both the Stoxx 600 and its US peers.

A case in point, planned capacity for June on the UK-Portugal route was at 63% of 2019 levels, versus intra-Europe on 53%.

Meanwhile, intra-European bookings increased by six percentage points to 31% of 2019 levels over the week ending on 17 May - the highest level since the pandemic.

"We find this trend encouraging and expect further improvement in bookings and capacity as travel restrictions in the UK and EU are eased in June," the analysts said.

BoA's higher capacity and load forecasts meant that their estimates for the group's third quarter revenues were 11% ahead of consensus.

The analysts recommendation for EasyJet and IAG shares was unchanged at 'buy', as were their respective target prices of 1,200.0p and 270.0p.