Record airline profits fail to lure back investors
Airlines are struggling to convince investors to back the travel recovery despite reporting booming profits and splurging tens of billions of dollars on new planes. The MSCI index tracking global airlines is trading about 40% below pre-pandemic levels. It has fallen more than 20% since the start of July, even as many airlines including British Airways owner IAG, easyJet and Singapore Airlines have reported record earnings. Carriers have also ordered more than 2,800 new planes so far this year in a multibillion-dollar bet the industry is set for a period of strong growth. Yet high fuel prices have combined with economic fears and continued concerns over consumer spending to unnerve investors, who have anyway long seen airlines as a cyclical sector vulnerable to external shocks, from volcanic ash clouds and pandemics to economic downturns. One investment banker said following the pandemic the industry was seen as “uninvestable” by many investors. Some airlines are still in vogue. Shares in some Asian carriers — including Singapore Airlines — have performed well as the region is still enjoying a post-pandemic surge in travel after opening up slowly. US airlines with less exposure to the slowing domestic market outperformed their peers, while Ryanair has been picked out as a long-term winner in Europe after using the pandemic disruption to its advantage to embark on a period of rapid growth. However, shares in Air France-KLM hit a record low on the same day the company announced a record profit in the third quarter. “Investors are fully looking through the results with an eye on macro risks into the northern hemisphere winter,” Bernstein analyst Alex Irving said. The investor scepticism in Europe comes despite airlines reporting strong demand for travel into the winter, although data released this month showed a hit to bookings globally following the outbreak of war in the Middle East. “There is always this question ‘summer is good but how about winter?’” Wizz Air CE Jozsef Varadi said. “Winter is good too”.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2023-11-20/general/record-airline-profits-fail-to-lure-back-investors
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Record airline profits fail to lure back investors
Airlines are struggling to convince investors to back the travel recovery despite reporting booming profits and splurging tens of billions of dollars on new planes. The MSCI index tracking global airlines is trading about 40% below pre-pandemic levels. It has fallen more than 20% since the start of July, even as many airlines including British Airways owner IAG, easyJet and Singapore Airlines have reported record earnings. Carriers have also ordered more than 2,800 new planes so far this year in a multibillion-dollar bet the industry is set for a period of strong growth. Yet high fuel prices have combined with economic fears and continued concerns over consumer spending to unnerve investors, who have anyway long seen airlines as a cyclical sector vulnerable to external shocks, from volcanic ash clouds and pandemics to economic downturns. One investment banker said following the pandemic the industry was seen as “uninvestable” by many investors. Some airlines are still in vogue. Shares in some Asian carriers — including Singapore Airlines — have performed well as the region is still enjoying a post-pandemic surge in travel after opening up slowly. US airlines with less exposure to the slowing domestic market outperformed their peers, while Ryanair has been picked out as a long-term winner in Europe after using the pandemic disruption to its advantage to embark on a period of rapid growth. However, shares in Air France-KLM hit a record low on the same day the company announced a record profit in the third quarter. “Investors are fully looking through the results with an eye on macro risks into the northern hemisphere winter,” Bernstein analyst Alex Irving said. The investor scepticism in Europe comes despite airlines reporting strong demand for travel into the winter, although data released this month showed a hit to bookings globally following the outbreak of war in the Middle East. “There is always this question ‘summer is good but how about winter?’” Wizz Air CE Jozsef Varadi said. “Winter is good too”.<br/>
