Wizz Air (LON: WIZZ) shares are up 5% today on the back of the monthly traffic report. Clearly Wizz is doing well, but the more interesting question is whether this is something specific to WIZZ shares or is something that will be true across the sector. So, will Easyjet, Ryanair and IAG shares follow? As ever we’d expect the IAG (because of the long distance business of BA and Iberia) to be slightly different but still, we could expect to see the same effects. Or, of course, perhaps not.
The Wizz Air numbers: “In October 2023, Wizz Air carried 5,404,480 passengers, representing a 19.4% increase compared to October 2022, at a load factor of 92.5%. The airline continued to grow its network and improve its customer offering in October.”
We’ve three different issues we’d like to pull out of this. Of course the airlines tanked, horribly, during lockdown. So, there’s going to be a recovery from that - but when do we declare that the recovery is over? That we’re past the cyclical comeback?
Secondly we might want to think about the size of the sector as a whole. Short haul air travel is growing as places get richer so there’s that sectoral growth to consider. The third is, well, how much of this is specific to Wizz rather than the sector? We could, for example, imagine that given the central and eastern European focus - where economic growth is stronger - then both the route and sectoral growth is better for Wizz than others.
Wizz Air share price from Google Finance
We’ve looked at these issues before with Wizz Air: The larger issue is in considering what this tells us about the aviation market more generally. After lockdown there were two possible responses. One would be that we'd simply got out of the habit of taking trips and therefore air travel simply did not recover. That seems, from these figures, not to be what did happen. Instead we're all clambering aboard as we used to. Therefore Easyjet should also show a significant increase in passenger volumes and revenues.
“That's not enough though. For both Wizz and Easyjet the purpose is to get the person there so that the person can have the fun - they're about leisure travel more than anything else. And for leisure travel it pretty much has to be the person having the leisure doing the travelling.
“IAG's situation is a little different. For the profit driver there is business travel. And here lockdown does seem to have changed behaviour. We're seeing it in work from home, the drop in commuting and the prices of office buildings. IAG's finances aren't going to recover in the same way unless business travel fully comes back. On that the jury is still out.”
At some point those past issues will be resolved and we should go back to thinking of the airlines as being distinct and not wholly driven by sectoral issues. But is that true yet?