Airline stocks enjoy share price bump following positive forecast for 2019
Several airline stocks have enjoyed share price bumps today following a positive note on European airlines by Davy Research.
Air France-KLM, Norwegian and Thomas Cook were among the airlines that enjoyed spikes in their share price, with the Franco-Dutch carrier enjoying a near 5 per cent rise. Norwegian's share price increased by 3.52 per cent while Thomas Cook's rose by 3.65 per cent.
The note by Davys read: "We think earnings momentum in the European airlines sector will inflect positively as we exit the winter trading season. Industry consolidation, reduced capacity growth and moderating fuel costs should support EPS [earnings per share] upgrades as the year progresses."
In a boost for budget airlines Ryanair and Wizz Air, Davys singled them out as its "preferred names" and upgraded their ratings from "neutral" to "outperform". Ryanair's share price rose by 3.32 per cent and rival Wizz by 2.45 per cent.
Read more: Ryanair slashes profit guidance by €100m amid falling revenue
Earlier in the day British Airways owner IAG and EasyJet rose nearly 1 per cent, however, at the time of writing, IAG was down -0.02 per cent and EasyJet -0.94 per cent.
The airline industry has endured a tough time in recent months because of the impact uncertainty around Brexit has started to have on consumer confidence.
Late last week Ryanair issued another profit warning, reducing its full-year profit guidance by €100m (£88m) due to a drop in revenue from winter fares.The budget airline said it expects profit after tax of between €1bn and €1.1bn, down from a range of €1.1bn to €1.2bn.
Chief executive Michael O’Leary also warned the airline cannot rule out further cuts to air fares or a further reduction in its full-year guidance in the case of “unexpected Brexit or security developments”.
AJ Bell Investment director Russ Mould told City A.M: “The removal of some capacity, via closures or possibly mergers, greater stability in the oil price and a reacceleration of global growth would be potential positive for airline stocks which have lost a lot of altitude since they peaked globally, share-price wise, in January 2018.
“Oil is currently behaving itself and there is potential for greater capacity discipline so perhaps the greatest question mark comes in the form of the broader economy – and that is before we get to the issue of Brexit and all of the complications this could bring with regard to licences to operate and the EU’s open skies agreement.”