11th Mar 2022 15:44
(Alliance News) - Airlines and their suppliers were expecting 2022 to finally be the payback year, with pent-up travel demand after two long years of pandemic.
Instead, the Russian invasion of Ukraine has given a fearful public a new reason to stay home.
What's more, sanctions against Russia have pushed up the price of all energy supplies, including jet fuel, and airlines will need to use more of that expensive stuff to bypass airspace that has now been closed in tit-for-tat moves by Western and Russian authorities.
London-listed airline stocks were rallying on Friday, though remain down so far in 2022.
The worst hit, Budapest-based Wizz Air Holdings PLC was up 7.0% on Friday and is up 28% in the past five days, but remains down 38% in the year to date.
Luton-based budget rival easyJet was up 1.8% on the day and 17% on the week but is down by a less-steep 19% in the year so far.
Holiday airline Jet2 PLC was up 4.2% on the day, up 24% on the week, and down only 2.0% in the past two months or so.
Long-haul carrier International Consolidated Airlines Group SA was trading up 3.0% and is up 23% in the past five days, though still is down 36% in 2022.
"Airline stocks have been on a wild ride since the Ukraine invasion, as has the oil price," said Davy Research.
Brent oil was quoted at USD110.98 a barrel on Friday afternoon in London, up 42% from USD78.32 on New Year's Eve. At the start of this week the North Sea crude benchmark touched USD140 a barrel, meaningly it had nearly doubled in the space of just over two months.
Davy said IAG needs its revenue line to "come back in a big way", as cost inflation items - including airport charges as well - will offset cost savings.
In that sense, the owner of British Airways and Iberia is fortunate to be a major player on the key north and south Atlantic routes, which are fully back from Covid, Davy noted, though with more leisure travels and few business ones.
However, the Irish broker said it favours Deutsche Lufthansa AG among airline stocks, giving it an 'outperform' rating. Davy likes Lufthansa's large cargo operation, narrowing pension deficit, and balance sheet strength.
Lufthansa was up just 0.2% in Frankfurt on Friday, but the stock is up 29% over the past five days and actually is in the green for 2022, up 1.4%.
By Tom Waite; [email protected]
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