Our analysis of competitive positioning suggests LCC penetration will rise to reachnearly half of the market in Europe and APAC ex-China by 2025: Our new analysissuggests a 10%+ widening of the unit cost gap between low-cost and full-service carriersshould see LCCs continue to gain market share in Europe and APAC ex-China. Our LCCpenetration model suggests LCCs should control nearly half of capacity in each of thesemarkets by 2025. This has significant economic ramifications for FSC competitors/networkcarriers and airline industry suppliers globally.

Global airlines—improved competitive positioning likely to drive market sharegains for European and APAC LCCs, while FSCs struggle to restructure: Wereiterate our Outperform ratings on European LCCs easyJet (TP up 23% to 1,032p),Ryanair (TP up 4% to €17.91) and Wizz Air (TP up 18% to 5,788p), raising our 2023-onward estimates for each in accompanying notes as our confidence in competitivepositioning improves, while in APAC we see IndiGo (OP, TP Rs 2,100) set to gain attractiveshare and recover double-digit net margins. We are concerned about the competitivepositioning of Underperform-rated Air France-KLM (TP €2.20), Lufthansa (TP €4.60) andQantas (TP A$ 3.00) given cost management and likely market share losses.