DAVY VIEW

The comparison of easyJet and Wizz is intriguing. As our recent report referenced, Wizz is moving onto easyJet’s network and has ambitious plans at Gatwick (20% over time). However, easyJet will have 71 aircraft based there in summer compared to one for Wizz and its main competitor set, its network airlines and tour operators. Wizz can ramp up quickly (to 70-90% almost immediately and to 100% in around two months) but booking curves are narrow (50% of seats sold in last 2 weeks versus 4-5 weeks previously). easyJet has undergone its own restructuring (staff numbers reduced at the majority of locations by 30%) and moved to a profitable core of 302 aircraft this summer (331 in summer 2019). While both are rated the lowest investment grade rating (Baa3), Wizz has more liquidity runway (c.24 months versus c.14 months for easyJet) in a fully grounded scenario but easyJet is hugely geared to positive working capital from nascent demand. Our view is that the valuation gap between the two is stretched.