Will the easyJet share price bounce back?
Last weeks decision to put Portugal on the amber list for UK travellers was a big disappointment for easyJet (LSE: EZJ). But markets had already turned cautious on airlines  the easyJet share price fell steadily for most of May. The airlines shares have fallen by nearly 10% over the last month, trimming the stocks 12-month gain to 15%. 5G is here  and shares of this sleeping giant could be a great way for you to potentially profit! According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air And if you click here well show you something that could be key to unlocking 5Gs full potential...  Three good things  Lets start with the good news. easyJet has completed its largest ever restructuring and cost-cutting program over the last six months. This has included redundancies, pay cuts, and changes to working hours for flight crew. Assuming that air travel returns to normal later this year, I think easyJets profitability could recover quite quickly. This could support a higher share price, despite the dilution from new share issues. The next few months seem likely to be difficult, but easyJet still has plenty of cash on hand. The airline reported 2.9bn of cash and unused debt at the end of March. CEO Johan Lundgren does not expect to need more financing unless the 2022 summer season is disrupted. Finally, I think that easyJets low-cost structure, large size, and short-haul focus mean that it could take market share from higher-cost flag carrier airlines when air travel recovers. This could help easyJet recover more quickly than some rivals. Its not all good news. Airline industry body the IATA estimates that passenger numbers in Western Europe wont return to 2019 levels until the end of 2023. This worries me because many of the costs involved in running an airline are fixed. They dont change when passenger numbers fall. What this means is that while easyJet is flying at reduced capacities, its costs per seat are much higher. This makes it harder to fly profitably. I think this could put pressure on easyJets share price for some time yet. Some of these increased costs should fall away quickly when travel restrictions are lifted. But some wont. One area that concerns me is easyJets aircraft finance costs. These have risen sharply due to higher debt levels and an increase in the number of leased aircraft in easyJets fleet. These changes helped the airline to raise funds last year, but this money must now be repaid. easyJet share price: my decision  My sums suggest that at a share price of 1,000p, easyJet shares are valued at around 12 times historic peak earnings. This suggests to me that the market has already priced in a strong recovery in air travel. Im also worried that it may take longer than expected for easyJets profit margins to fully recover. Although some operating costs should be lower, I think these savings may be offset by higher finance costs. On balance, I think easyJets share price is probably high enough at the moment. I dont see any good reason for a higher valuation, but I can see some potential risks. Im not interested in buying at this level, but I do think that easyJet will remain one of the better airline stocks.