By Pierre Bertrand
The bulk of European airlines begin reporting their results from next week, with Ryanair Holdings on Monday disclosing its fiscal first quarter results. Most of the continent's major carriers are expected to report declines in earnings as many work to increase capacity amid persistent supply-chain hurdles and delays in aircraft deliveries. Here is what you need to know:
WHAT TO WATCH:
-- FALLING EARNINGS: Earlier this month, Air France-KLM warned the coming Olympic games in Paris were harming its unit revenue, and German rival group Deutsche Lufthansa quickly followed with its own profit warning, saying that it will be increasingly challenging for its flagship airline to break even this year.
Air France-KLM is expected to report a 41% decline in net income, and analysts are forecasting a 43% contraction in Deutsche Lufthansa's net profit, according to a Visible Alpha consensus. Meanwhile, London-listed International Consolidated Airlines, owner of British Airways, is expected to post a 22% decline in half-year net income.
Earnings expectations are more mixed among the region's low-cost carriers. EasyJet is expected to report a 14% increase in third-quarter net income, according to Visible Alpha. Wizz Air Holdings' fiscal 2025 first-quarter operating profit is expected to nearly double, though analysts expect Ryanair will post a 24% decline in net income for its first quarter, according to Visible Alpha consensus.
-- PRICING & COSTS: Higher unit costs are expected to hit Air France and Lufthansa in the second quarter, Deutsche Bank analyst Jaime Rowbotham said, adding that unit revenue for the period would either decline or do little to offset the 2% to 3% anticipated increase in unit costs. IAG's result should also reflect higher fuel and operating expenses, according to JPMorgan analysts. Those cost increases coincide with air fares for peak summer flights that remain lower than a year ago. Flights advertised in June for departures in August are 2% cheaper on year, a slight improvement on the 7% on-year decline in fares for flights advertised in May for departures in July, according to Deutsche Bank. Last-minute fares also show signs of weakness, with prices 1% lower on year in June compared with 3% higher on year in May, Deutsche Bank's analysis showed.
WHEN COMPANIES ARE SCHEDULED TO REPORT
-- Ryanair 1Q: July 22
-- easyJet 3Q: July 24
-- Air France-KLM 2Q: July 25
-- Deutsche Lufthansa 2Q: July 31
-- Wizz Air 1Q: Aug. 1
-- IAG 1H: Aug. 2
Write to Pierre Bertrand at pierre.bertrand@wsj.com
(END) Dow Jones Newswires
July 18, 2024 10:56 ET (14:56 GMT)
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