Wizz Air: The best-positioned carrier in Europe (upgraded to BUY)

Wizz Air has the strongest liquidity position in the sector, which could cover two years of cash burn and allows it to maintain its commitment to the fleet expansion. With its growing fleet of A321neos, we see Wizz Air as the lowest-cost producer in Europe, beating Ryanair in head-to-head competition on the same airport pairs. This should allow Wizz Air to grow its market share, as well as stimulate demand by offering even lower ticket prices. With less than 20% of the CEE population flying at least once a year, Wizz Air’s core market should offer significant long-term growth potential. We expect the coming winter to be very difficult for the sector, and the negative newsflow related to the lockdowns being re-introduced could weigh on the share prices of all the listed European carriers, in our view. That said, we believe the improvements in both treatment, and the track and trace capacity, as well as the adoption of rapid tests at airports, should mean that summer 2021E – while still disrupted – should be tangibly better than this year. As long as we are right, we would view the current share price level and any prospective near-term weakness as an attractive buying opportunity. We expect Wizz Air to continue to lead in terms of capacity resumption, and – thanks to its efficient fleet and best-in-class cost structure – it should emerge stronger from the current crisis. On a mid- to long-term perspective, we believe the pandemic may speed up the consolidation of the European airlines, which could translate eventually into better pricing and profitability. We have upgraded the stock to BUY, raising our 12M price target (PT) slightly to GBP 44/share.