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 account for 30% of the airline’s costs. However, the desire to travel again and the sector’s good results make us believe that the wind is blowing in the right direction for air travel.

Gregory Levey Nizerol, head of the Romandie team

The International Air Transport Association (IATA) announced a combined loss of $9.7 billion in 2022 worldwide, much less than the last two years ($42.1 billion in 2021 and $137.7 billion US dollars in 2020). The improvement is significant given the current state of health and the geopolitical context. In addition, total global airline revenues are estimated at $782 billion in 2022, approaching the $838 billion reached on the eve of the pandemic in 2019. This represents an increase of over 54.2% compared to 2021.

Global PKP (Revenue Passenger-Kilometers) levels continue to rise this year, driven by vaccine deployments, the lifting of travel restrictions and the opening of additional routes. They are expected to return to their pre-pandemic levels in 2024. Indeed, business flights in Europe grew 53% last quarter, and with US flights up 23%, America du Nord should return to positive profitability. this year.

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

We currently consider the following companies worthy of mention in the last quarter:

  • EasyJet (EZJ LN) reports that last quarter capacity was 87% of 2019 levels, or 550% of 2021 levels. The Group expects to reach 90% capacity next quarter and 100% capacity in the last quarter of this year. The group has also just exercised an option to purchase 56 A320neos, fortunately at better prices than originally planned.
  • By his side Delta Airlines (DAL UN) expects to recover 100% of its attendance in 2019 on the occasion of the 3rde quarter of 2022, the expected operating margin is 13%. When the company hit 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 its operating margin to return to +13% in 2023.
  • southwestern airlines (LUV UN), it is expected that by the end of May 2022 operating revenue will reach 2e 13% more than in 2019. The company enjoys an excellent brand image, low operating costs and over $2 billion in cash.

Thus, aircraft are flying almost the same as before the pandemic, despite the strong impact on the industry of the tense economic and social situation. This is a very positive signal for the coming months.

In general, portfolios have suffered since the beginning of the year; Asset diversification is no longer a systematic win-win solution as the hike in key interest rates has affected both bonds and equities. We are referring, in particular, to US tech companies that have sharply adjusted to make their valuations more acceptable.

In this context, yield optimization products have a well-deserved place in the portfolios of clients. Investors can then use Barrier Reverse Convertible on indices to diversify your portfolio or through Reverse Cabriolet Low blow to securities to replace certain straight lines, expose yourself to purchase 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 a return near 10% per annum accompanied by market protection, not onlineWith directare.

Below is the price in this sense for a structured product in the air travel sector:

2022.07.22.Structured product

2022.07.22. Graphic names of airlines