EasyJet partners with Virgin for connections, but analysts cut targets

EasyJet has partnered with Virgin Atlantic for connections from London Gatwick to a number of destinations in North America and the Caribbean.

A joint statement from the two airlines said the collaboration will open up destinations including Las Vegas, Orlando, Antigua and St. Lucia as EasyJet will use its network of airports across mainland Europe to access customers who are keen to make the trip across the Atlantic Ocean.

Virgin has similar agreements in place with airlines such as Scandinavia’s largest airline Norwegian Air Shuttle ASA, Canada’s WestJet and Singapore Airlines Ltd.

Major airlines often lose money from running short-haul flights in order to provide connections for more profitable long-haul flights and so such deals are advantageous for Virgin.

London-listed EasyJet, meanwhile, is attempting to expand its “worldwide by EasyJet” connections service to additional airports, with further potential deals with Middle Eastern and Far-Eastern airlines reported to be on the horizon.

EasyJet’s shares were down on Tuesday, however, as some City analysts cut their targets.

Berenberg cut its target price on easyJet to 1,215p from 1,310p and UBS caught up by slashing its 12-month target price to 1,300p from 1,900p despite raising its PBT forecast for the current year up 5%, though additional IT costs result in reported PBT falling 4%.

However, for 2019, UBS analysts are more cautious on the yield outlook given guidance from the management team that yields in the first half could be down mid-single digit levels, together with geopolitical risk and data suggesting prices are moderating.