On Monday, a Bernstein analyst provided an outlook on the European airline industry, predicting a general decline in short-haul yields for the year 2025. The analysis pointed to an expected decrease in Revenue per Available Seat Kilometer (RASK), a key industry metric, due to capacity growth outpacing demand.
Despite this trend, Ryanair, Wizz Air, and Air France-KLM are anticipated to benefit from softer year-over-year comparisons, presenting them with an opportunity to restore yields. According to InvestingPro data, Wizz Air has maintained a healthy revenue growth of 7% over the last twelve months, with total revenue reaching $5.66 billion.
The analyst observed that in 2024, unit revenues for five out of the six airlines covered remained steady, with RASK changes ranging from a decrease of 0.3% to an increase of 1.4% year-over-year. This stability was seen as a reflection of continued high fares, even as the surge in demand following the pandemic has subsided. The industry's supply constraints, attributed to a lack of available aircraft to meet market demand, have supported these elevated fare levels.
Ryanair, in particular, has been singled out as having the most straightforward path to RASK growth in 2025. The airline's RASK dropped by 7% in the summer of 2024 due to a temporary halt in distribution through Online Travel Agencies (OTAs), which has since been resolved. As a result, the company is expected to have an easier time increasing yields next year.
Similarly, Wizz Air and Air France-KLM are also expected to see improvements due to their own soft comparisons, related to Ryanair's discounting and the Olympic Games, respectively. InvestingPro analysis shows Wizz Air currently trades at a P/E ratio of 6.56, with a significant debt burden of $7.27 billion. Subscribers can access 10 additional ProTips and comprehensive financial metrics at InvestingPro.
For most airlines, the summer of 2024 saw short-haul unit revenues closely align with the previous year's figures. The European holidaymaker's strong demand has helped maintain unit revenues well above pre-pandemic levels. Early indicators for winter demand appear positive, but the aviation industry is known for its unpredictability, with customer booking habits not extending far in advance.
The analysis concluded with the expectation that while some airlines may experience small declines in unit revenue as capacity growth exceeds GDP growth, the overall price levels are likely to remain significantly higher than those seen before the pandemic.
This is largely due to the ongoing supply constraints that the European airline industry faces. With a beta of 2.26, Wizz Air shows higher volatility than the broader market, making it crucial for investors to stay informed. Get real-time alerts and in-depth analysis with InvestingPro.
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