(Bloomberg) -- UK travel stocks are outperforming at the start of 2023, with an upbeat outlook from EasyJet Plc providing the latest boost for a sector that has not yet recovered from a pandemic-era plunge.

EasyJet’s shares jumped as much as 11% Wednesday as it predicted full-year earnings ahead of market expectations thanks to strong bookings and a rise in revenue per seat. The stock has rallied 59% in January, while peers like Wizz Air Holdings Plc, British Airways-owner IAG S.A. and TUI AG have seen similar surges.

Analysts are hopeful that passenger numbers could soon reach pre-pandemic levels, even as an economic downturn takes hold. EasyJet had 17.5 million passengers in the latest quarter, up 47% year-on-year, according to Wednesday’s statement. During the same quarter in 2019 the firm had 22.2 million passengers.

“The positive trading update from EasyJet supports our sector thesis that there remains headroom for continued volume and earnings recovery at the airlines,” Gerald Khoo, an analyst at Liberum Capital said in a note. Khoo has buy ratings on EasyJet, IAG and Dublin-listed Ryanair Holdings Plc.

Even after this year’s gains, travel stocks are nursing sharp losses triggered by the outbreak of Covid-19 almost three years ago. Companies that were forced to issue debt during the pandemic have faced a surge in servicing costs as interest rates jumped, while equity raises diluted many firms’ earnings per share.

And while sales continue to rebound, input costs are a major worry. Airlines are facing higher wages and airport servicing fees, while jet fuel is about 50% higher than pre-pandemic levels, according to Bloomberg Intelligence analyst Conroy Gaynor. 

“The concern is how much longer can higher pricing be used to offset these costs, especially if there’s a downturn,” he said in written comments. “There’s a profitability issue, but so far this year demand appears higher than previously expected.”

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