Good Cost and Cash Flow Management as EasyJet Looks Ahead to a Strong Summer

No-moat EasyJet halved first-quarter 2022 losses and significantly reduced cash burn as the group prepares for a strong summer ahead. The airline flew 64% of 2019 capacity in the first quarter, in line with previous guidance, while load factors came in slightly below the guided 80% level, largely due to renewed restrictions over December as a result of the omicron variant. Management expects near-term bookings to remain affected by omicron, but is encouraged by the sharp uptick in bookings since the U.K. government and other European countries’ announcement of travel restriction relaxations. Currently 67% of precoronavirus capacity is for sale in the second quarter, while management is guiding for a recovery to 2019 capacity levels in the fourth quarter, which includes the European summer travel period. The group’s more cautious approach relative to low-cost peers Ryanair and Wizz Air seems to be bearing fruit as the airline focuses on cost rationalization and consolidation at its key hubs. We maintain our GBX 830 fair value, with shares trading in discount territory.