EasyJet Cuts Traffic Outlook and Cautious About Costs; GBX 915 FVE; Big Upside Despite Uncertainty

EasyJet is downgrading its capacity and cost outlook in response to the aviation industry’s staff shortages as it struggles to rebuild capacity in the face of a sharp rebound in demand. The update is unsurprising, given widely reported flight cancellations and disruptions in Europe. The group now expects to fly 87% of capacity in the fiscal third quarter compared with previous guidance of 90%. During the fourth quarter, which includes the busy summer travel period, capacity is expected to reach 90% versus the 97% guided previously. Additionally, the cost impact from building in extra resilience will drive unit costs higher, generating profit headwinds. We will make changes to our forecasts, but do not expect a meaningful change to our GBX 915 fair value estimate. The stock is trading in 5-star territory and seems very attractive despite the highly uncertain outlook.