EasyJet Upbeat as It Ramps Up Capacity Levels Into Financial 2022; We Adjust Our FVE to GBX 830

No-moat EasyJet released an upbeat trading statement for the financial year ended September 2021. The group is expected to report its lowest quarterly loss since the start of the crisis in fourth-quarter 2021 as it increased flying capacity to 58% of precoronavirus levels, up from 17% in the previous quarter. Flying activity was dominated by intra-European travel, while lingering travel restrictions in the U.K. continued to hamper travel between the U.K. and Europe. EasyJet’s high share of travelers from the U.K. means it is posting a slower recovery than low-cost carriers Ryanair and Wizz Air. Encouragingly though, the group expects to fly 70% of prepandemic capacity in first-quarter 2022 as U.K. travel restrictions start to ease. The group’s net debt position improved significantly to GBP 900 million, from GBP 2 billion a quarter ago, thanks to the recent GBP 1.20 billion rights issue. We lower our fair value estimate to GBX 830 to reflect the impact of the rights issue and lower our uncertainty rating to high, from very high, with the improvement in the group’s capital structure. The share is starting to look increasingly attractive on a risk/reward basis, but we still prefer Wizz Air, which has a more attractive growth outlook.