Record airline profits fail to lure back investors

afr.com:

London/Singapore | Airlines are struggling to convince investors to back the travel recovery despite reporting booming profits and splurging tens of billions of dollars on new planes.

The MSCI index tracking global airlines is trading about 40 per cent below pre-pandemic levels. It has fallen more than 20 per cent since the start of July, even as many airlines including British Airways owner IAG, easyJet, and Singapore Airlines have reported record earnings.

High fuel prices have combined with economic fears and continued concerns over consumer spending to unnerve investors. AP

Carriers have also ordered more than 2800 new planes so far this year in a multi-billion-dollar bet the industry is set for a period of strong growth.

Yet high fuel prices have combined with economic fears and continued concerns over consumer spending to unnerve investors, who have anyway long seen airlines as a cyclical sector vulnerable to external shocks, from volcanic ash clouds and pandemics to economic downturns.

One investment banker said following the pandemic the industry was seen as “uninvestable” by many investors.

Some airlines are still in vogue. Shares in some Asian carriers – including Singapore Airlines – have performed well as the region is still enjoying a post-pandemic surge in travel after opening up slowly.

US airlines with less exposure to the slowing domestic market outperformed their peers, while Ryanair has been picked out as a long-term winner in Europe after using the pandemic disruption to its advantage to embark on a period of rapid growth.

However, shares in Air France-KLM hit a record low on the same day the company announced a record profit in the third quarter.

“Investors are fully looking through the results with