Sell Ryanair on elevated pricing risks, says Berenberg

Berenberg's said its revised bottom-up capacity model suggested elevated short haul pricing risks, indicating a potential "value trap" for low-cost carriers exposed to stalled earnings momentum.

The German broker expects short-haul capacity to accelerate 7.5% in 2019, despite anticipating the challenging fare environment seen at present to continue.

On Ryanair, Berenberg said industry capacity growth had continued to offset its ability to manage cost inflation, leading it to drop its target price on the firm to €9.75 per share from its previous €12.60 mark.

"We downgrade Ryanair to 'sell' as it faces sustained competitive pressure to pricing, while its cost progress remains highly uncertain."

The broker also highlighted non-headline fuel costs as a factor in its decision to lower its 2019 net income estimate to below Ryanair's guidance range of €1.1bn-1.2bn.

"We expect continued pressure on valuation while the market awaits more clarity on the timing and amplitude of labour cost inflation. We expect another down year in net income in FY 2020, and see fewer paths to growth."

In addition to the Ryanair downgrade, Berenberg stood by its 'buy' ratings on British Air operator International Airlines Group and Wizz Air and reiterated its 'sell' rating on EasyJet.