Southwest’s share price moving upwards Credit Suisse & UBS positive about easyJet &Ryanair prospects

Credit Suisse rates Ryanair as 'outperform'; sees attractive investment case in Ryanair

Credit Suisse has initially covered Ryanair with an 'outperform' rating, with a price target of EUR4.50 on the LCC. Credit Suisse stated Ryanair's investment case was attractive over the medium- to long-term as strong cash-flow generation prospects outweighed short-term negatives.

Credit Suisse added that the short-haul restructuring at Air France-KLM, Iberia and Lufthansa should work in favour of both Ryanair and easyJet, but stated "we see it as challenging for Ryanair to achieve significant fare increases in its 2011 financial year as it continues to grow capacity at double-digit rates in a depressed leisure travel market".

UBS initiates 'buy' rating for easyJet and Ryanair

Meanwhile, UBS stated it expects both easyJet and Ryanair to offer investors "attractive ROIC (18%), profitability and cash-flow characteristics", adding that both carriers have the "balance sheets and earnings ability to pay material dividends". UBS has initiated coverage of both LCCs with a 'buy' rating.

UBS expects LCC shares to continue to trade at a premium to legacy airlines

In this sense, UBS stated the carriers have benefited from high asset utilisation rates, competitive pricing and a focus on cost-cutting efforts, adding, '"with profitable track records, strong balance sheets and continuing growth, the low-cost airlines rightfully, in our view, trade at a premium to the legacy carriers. We believe that this premium will remain, given the flag carriers have relatively higher costs bases, weaker balance sheets, generate lower returns and have stakeholders with conflicting objectives".

For more analysis, please see The Centre's landmark Global LCC Outlook Report.

Selected LCCs daily share price movements (% change): 19-Jan-2010

Source: Centre for Asia Pacific Aviation & Yahoo! Finance