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Airlines; Wizz26s trade away discount, new FOY29s screening some value here

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  • Ryanair doesn't shy away from celebrating itself (below). As we highlighted during Finnair roadshow, it does indeed have the best unit costs among LCC (& by extension Network) carriers & it translates to an impressive double digit EBIT margin (~15% in current results).
  • Only sector screen cheap we had was on the offer side of the Wizz26s; its moved in 25bps since/this month (below) & it now looks fair/take it off.
  • New Finnair 29s at Z+203 (issued at +200) are starting to screen some value here. To reiterate 2-notch government uplift here (which includes history of financial support) which will need to balanced with weaker standalone fundaments; lowest scale (€3.1b), highest unit costs among LCC's, EBIT margins only above easyJet & Lufty with guidance a lacklustre 6% (should move it to 2nd last) & elevated exposure to Finland/Helsinki as its hub.
  • Its hard to take a firm RV view given no curve or CDS (i.e. liquidity over time), but pickup is substantial against the new AFFP29s (+40bps) for equal (S&P) ratings. That is in some part due to impressive moves in AFFP secondary (new 29s -28bps, 28s -20).
  • Not sure if AFFP moves are on optimism of previously lower rated IAG receiving a uplift into IG. As we said then we wouldn't read-through/get our hopes up for AFFP; we didn't see much progress on gross deleveraging in Q1 (reminder S&P treats the €3.5b in hybrids as full debt while co reports as full equity) or strong enough 1Q results/FY guidance for headline earnings to push a upgrade.
  • Finally reminder FOY29s does have a CoC put (at par) as protection if Finnish government pulls out so we don't see a need to price it on standalone BB- ratings for now (if so Avis becomes a potential comp - well wide). We keep a light screen cheap on it with no firm view on timing for it to come in (i.e. carry & roll).



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  • Ryanair doesn't shy away from celebrating itself (below). As we highlighted during Finnair roadshow, it does indeed have the best unit costs among LCC (& by extension Network) carriers & it translates to an impressive double digit EBIT margin (~15% in current results).
  • Only sector screen cheap we had was on the offer side of the Wizz26s; its moved in 25bps since/this month (below) & it now looks fair/take it off.
  • New Finnair 29s at Z+203 (issued at +200) are starting to screen some value here. To reiterate 2-notch government uplift here (which includes history of financial support) which will need to balanced with weaker standalone fundaments; lowest scale (€3.1b), highest unit costs among LCC's, EBIT margins only above easyJet & Lufty with guidance a lacklustre 6% (should move it to 2nd last) & elevated exposure to Finland/Helsinki as its hub.
  • Its hard to take a firm RV view given no curve or CDS (i.e. liquidity over time), but pickup is substantial against the new AFFP29s (+40bps) for equal (S&P) ratings. That is in some part due to impressive moves in AFFP secondary (new 29s -28bps, 28s -20).
  • Not sure if AFFP moves are on optimism of previously lower rated IAG receiving a uplift into IG. As we said then we wouldn't read-through/get our hopes up for AFFP; we didn't see much progress on gross deleveraging in Q1 (reminder S&P treats the €3.5b in hybrids as full debt while co reports as full equity) or strong enough 1Q results/FY guidance for headline earnings to push a upgrade.
  • Finally reminder FOY29s does have a CoC put (at par) as protection if Finnish government pulls out so we don't see a need to price it on standalone BB- ratings for now (if so Avis becomes a potential comp - well wide). We keep a light screen cheap on it with no firm view on timing for it to come in (i.e. carry & roll).