Analysts at Liberum remain bearish on easyJet (LON:EZJ) remaining unconvinced about the airline’s new airline connections service. The new service, launched yesterday, allows customers to connect their easyJet flight with partner airline flights.
easyJet’s share price, however, reacted positively to the news yesterday, adding 0.67 percent to close at 1,202.00p, outperforming the FTSE 100 index which ended the session the session 0.28 percent lower at 7,379.70 points. The budget carrier’s shares have added about six percent to their value over the past year, and are up by just under 20 percent in the year-to-date.
Liberum reiterated its ‘sell’ stance on easyJet yesterday, with a price target of 1,100p, after the low-cost carrier announced that it was launching a new connections service. The news service, dubbed ‘Worldwide,’ will allow passengers to book connecting flights which combine easyJet with those of other airlines. The group’s launch partners are WestJet and Norwegian, which offer flights to North and South America and the Far East. The service will initially operate from Gatwick, the airline’s biggest base.
“Management sees scope to add other airlines and to replicate the model at other major bases,” the broker’s analyst Gerald Khoo said, as quoted by Citywire. “In our view, this offers incremental revenue, although we would be cautious on the upside in the short term.”
The analyst added that the key cost risk was from flight delays and ‘compensation liability’.
“We understand the agreement with the partner airlines have the principle that each airline is responsible for delay on its own flights, with the Gatwick connect service offering rebooking on the next available flight in the case of a missed connection. However, we are sceptical that EasyJet can avoid costs where a delay on its flight causes a missed long haul connect, resulting in an overnight – or worse – delay,” Khoo pointed out.
The news comes after easyJet recently updated investors on its passenger traffic, revealing that it had carried more passengers last month.