EasyJet to take off on back of Air Berlin slots acquisition - Morgan Stanley

EasyJet looks ready to reap the benefits of its moves to expand its short-haul flight business, as its acquisition of recently collapsed carrier Air Berlin's operations at Tegel Airport set up the British firm to take the title of Germany's leading airline.

Analysts at Morgan Stanley upgraded the investment bank's rating on EasyJet to 'overweight' from 'equal-weight' on Friday, raising the low-cost carrier's target price to 1,725p from 1,490p in the process, and tapped it as one of its preferred stocks for the year, along with competitor Ryanair.

"As the best-hedged name in the sector for 2018, combined with leverage benefits from the Air Berlin slots in Germany, we believe pricing momentum can gradually improve," said Morgan Stanley.

"Our price target moves up owing to expectations of strong outturn in FY18-19 revenue per seat (from 2% to 2.5% on average) and currency tailwinds in the US dollar offsetting the upward move in the oil price curve," added the analysts.

Morgan Stanley anticipated capacity growth in short-haul operations to slow throughout the year as a result of the collapse of Air Berlin and Monarch in 2017, reducing competition and allowing stronger pricing across the industry.

As of 1130 GMT, shares had rose 2.64% to 1,553.00p.