EasyJet (EZJ:LSE), the leading low-cost airline, continues to be under pressure despite the relaxation of COVID travel restrictions and a surge in international tourism this year. The share price reached a peak of 727 pence in February and has dropped dramatically to 418, representing a 40% drawdown. The current price is in-line with the lows seen in 2020 during the COVID fallout. We believe there is further room for the downward trend to continue.
Staff Shortages & Operational Problems
EasyJet has been one of the hardest hit airlines in the recent wave of flight cancellations across their key international airports such as London Gatwick, primarily due to staff shortages and not being able to keep up with the overwhelming customer demand for travel. Refunds to customers will have a significant impact on their financials and expectations are that customers will continue to be affected in coming months, as there is no immediate resolution. Bank analysts are forecasting the disruption and cancellations to cost EasyJet up to $200 million, with the company already struggling to fight back to a profitable position after 2 years of negative net profit.
Discontent is spreading broadly across European labour markets, which could further damage EasyJet’s recovery plans. The airline’s Spain-based crew are planning 9 days of strikes in July, hitting some of their most popular destinations. As inflation continues to impact labour, we expect similar strikes to cause disruption in other European destinations.
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