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(Sharecast News) - Analysts at Morgan Stanley downgraded their view on Europe's main airlines from 'in line' to 'cautious' after concluding that the impact of the Covid-19 pandemic on the sector was set to last for longer.
Hence, liquidity and balance sheet strength were set to be the key concerns, with Air France-KLM and Lufthansa having the most pressing need.
Easyjet on the other hand had until year-end while Ryan Air and Wizz Air had more than 12 months, they estimated.
Since the 1960s, global airline demand had never shrunk by more than 3.3% in any year or 30% for any single month.
In April 2020 however, demand was expected to fall by 90% and it remained to be seen how consumer behaviour might be changed.
Their base case was for demand to return to 2019 levels by 2022, although earnings would take until 2023-24 to fully recover, but the risks were skewed towards a worse outcome as travel bans and social distancing could remain in place for longer.
Consensus estimates for 2021 were also still too high in their opinion.
On the back of all of the above, they upgraded their recommendation for RyanAir to 'overweight' with Wizz Air already there.
However, Morgan Stanley cut its target price for RyanAir from €17 to €13 and on Wizz Air from 4,900.0p to 3,400.0p.
EasyJet on the other hand was downgraded to 'equalweight' as " strong demand and yields, free option on holidays business and carbon emissions policy)has lost traction due to subdued demand and likely longer period for the holidays business to generate earnings for the group."
Its target price also fell, from 1,800.0p to 800.0p.
Air France-KLM meanwhile was downgraded to 'underweight' (target price revised from €11 to €4) while Lufthansa stayed there (target price from €16 to €5).
Hence, liquidity and balance sheet strength were set to be the key concerns, with Air France-KLM and Lufthansa having the most pressing need.
Easyjet on the other hand had until year-end while Ryan Air and Wizz Air had more than 12 months, they estimated.
Since the 1960s, global airline demand had never shrunk by more than 3.3% in any year or 30% for any single month.
In April 2020 however, demand was expected to fall by 90% and it remained to be seen how consumer behaviour might be changed.
Their base case was for demand to return to 2019 levels by 2022, although earnings would take until 2023-24 to fully recover, but the risks were skewed towards a worse outcome as travel bans and social distancing could remain in place for longer.
Consensus estimates for 2021 were also still too high in their opinion.
On the back of all of the above, they upgraded their recommendation for RyanAir to 'overweight' with Wizz Air already there.
However, Morgan Stanley cut its target price for RyanAir from €17 to €13 and on Wizz Air from 4,900.0p to 3,400.0p.
EasyJet on the other hand was downgraded to 'equalweight' as " strong demand and yields, free option on holidays business and carbon emissions policy)has lost traction due to subdued demand and likely longer period for the holidays business to generate earnings for the group."
Its target price also fell, from 1,800.0p to 800.0p.
Air France-KLM meanwhile was downgraded to 'underweight' (target price revised from €11 to €4) while Lufthansa stayed there (target price from €16 to €5).