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Airline shares in demand

by LLB Reporter
26th Jan 22 11:40 am

The aviation sector has had plenty of false dawns since Covid first struck. Endless moving goalposts on flying restrictions and testing requirements has made it hard for the industry to push forward.

Thanks to the support of investors who stumped up cash on more than one occasion to keep airlines afloat, the main players are still in the market and are seeking to shift from survival mode back to some sense of normality.

Wizz Air’s results for the last three months of calendar 2021 perfectly illustrate the sector’s predicament. Passenger numbers are picking up and there are more bums on seats per available plane. Unfortunately, the business is still loss-making, which is unsustainable in an industry that has high fixed costs.

“Nonetheless, Wizz Air remains ever the optimist, which it must be when you consider it has picked up more airports slots at Gatwick airport and ordered more aircraft. It has bet hard that recovery will pick up soon and that its investments will help it secure an even bigger slice of the aviation market,” said AJ Bell’s Russ Mould.

“Fortune favours the brave and there are growing signs that Wizz Air, and other airlines, could be in a stronger position in the coming months.

“Many countries are taking the view that we need to learn to live with Covid and simply get on with our lives without onerous restrictions. The fact so many people have suffered from the Omicron variant and come out the other side feeling fine after a week or two could install confidence to want to get on a plane and enjoy holidays or travel for business again.

“Changes to UK testing rules have seen a spike in demand for half-term holidays next month, and airlines will be hoping this also leads to greater ticket sales across the year.

“A calmer period on the stock markets has encouraged some investors to look for stocks and sectors that have potentially been oversold, which might explain why many aviation stocks were in demand on Wednesday.

“British Airways owner International Consolidated Airlines flew 5.6% higher, Deutsche Lufthansa gained nearly 5%, EasyJet advanced 3.6% and Jet2 moved up 3.2%. Wizz Air was the laggard, albeit still rising 1.6% off the back of its latest results.

“The sector’s recovery won’t be easy, given oil prices are high which means equally high fuel costs. In the UK, the forthcoming changes to the energy cap will put a lot of pressure on family finances as energy bills shoot up again.

“Then there is the great unknown – will airlines go for all-out price war to fill planes in the important summer period, or will they argue that everything in life has got more expensive and pent-up demand means consumers might pay up if it gets them a long-missed fortnight away?”

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