A new direction for your investments: airlines

2022 shows the resilience of the aviation sector, which has clearly recovered despite the last two years marked by the COVID-19 pandemic. In addition, the consequences of the conflicts in Ukraine contributed to the increase in oil prices, which make up 30% of the airline’s expenses. However, the desire to travel again and the good performance of the sector lead us to believe that the wind is blowing in the right direction for air travel.

Gregory Levey Nicerol, head of the Romandie team

The International Air Transport Association (IATA) has announced a total loss of $9.7 billion worldwide in 2022, which is much lower than the previous two years ($42.1 billion in 2021 and $137.7 billion in 2020). The improvement is significant given the current health and geopolitical context. In addition, total global airline revenue is estimated at $782 billion in 2022, which is close to the $838 billion reached before the pandemic in 2019. This represents an increase of more than 54.2% compared to 2021.

Global PKP (Revenue Passenger Kilometer) levels continue to accelerate this year thanks to vaccine rollout, the lifting of travel restrictions and the reopening of additional routes. They are expected to return to their pre-pandemic levels in 2024. Indeed, business flights increased by 53% in Europe in the last quarter, and thanks to a 23% increase in the number of flights in the United States, America du Nord should return to positive profitability. this year.

07/22/2022. Reservation
Source: https://www.iata.org/en/iata-repository/publications/economic-reports/international-bookings-are-boosted-by-summer-vacation-travellers-and-fewer-restrictions/

Currently, we consider the following companies worthy of attention based on the results of the last quarter:

  • EasyJet (EZJ LN) reports that capacity for the last quarter was 87% of 2019 levels or 550% of 2021 levels. The group expects 90% next quarter and 100% in the last quarter of this year. The group has also just exercised an option to buy 56 A320neo aircraft, fortunately at more attractive prices than originally planned.
  • at his side Delta Airlines (DAL UN) expects to regain 100% attendance in 2019 on occasion 3d quarter of 2022 with an expected operating margin of 13%. When the company faced COVID in 2020, it had one of the most conservative balance sheets and the highest level of operating cash flow per aircraft in the industry. The group expects operating profitability to return to +13% in 2023.
  • Southwest Airlines (LUV UN) is expected to achieve operating income of 2 at the end of May 2022d increased by 13% compared to 2019. The company benefits from an excellent brand image, low operating costs and over $2 billion in cash.

In summary, planes are flying almost as much as before the pandemic, despite the strong impact on the sector of the strained economic and social situation. This is a very positive signal for the coming months.

Overall, portfolios have suffered since the start of the year; asset diversification is no longer a consistently winning solution, rising key interest rates have affected both bonds and stocks. We mean, in particular, US technology companies that have sharply adjusted, making their valuation levels more acceptable.

In this context, yield optimization products have a real place in the client’s portfolio. Then investors can use Barrier Reverse Cabriolet on indices to diversify your portfolio or through Reverse Cabriolet Low blow on securities to replace certain direct lines, to be subject to the purchase of certain securities within one year at the purchase price –30% / –50% in below today’s level. Then it becomes more convenient for customers to provide returns close 10% APR along with market protection rather than risk onlinewith directis.

Below are the prices in this sense for a structured product in the aviation sector:

2022.07.22.  Structured product

07/22/2022.  Graphic names of airlines