The UK Index airlines sector has had a tough week, shares falling 1.5% to 13% to keep investors on their toes but also offer multiple trading opportunities. Our position at the market coalface has once again proved invaluable to clients, allowing us communicate on the many drivers in play, providing clients with an opportunity to act promptly.

IAG started the week on the back foot (-0.5%) after the Cathay Pacific CEO said, in a statement about June traffic stats, that the Asian airline’s first-half performance continued to disappoint with competition pressuring revenues and yields. With easyJet shares in a long-term downtrend – in stark contrast to rival Ryanair – news of its CEO departure (off to ITV next year) actually saw its shares rise (+1.4%)!

While Tuesday was quiet, Wednesday saw the whole sector get an early kicking after the UK government said it would ban credit card transaction fees from next year (EU directive) to curb rip-off charges. However, by the end of the trading session losses were minimal on the assumption that prices would simply rise to offset the new rule and preserve profit margins.

Strong Q1 results from Wizz Air also helped the sector weather its mid-week storm, with a welcome upgrade to FY guidance helping its shares finish 3% to the good and revive bullishness, especially among the budget carriers. IAG saw little impact from news of extension to a planned BA cabin crew pay strike through mid-August – peak summer season – having alternative arrangements already in place.

On Thursday EasyJet shares fell a whopping 6% as Q2 results were flattered by Easter timing, and implied tough competition and a slower industry turnaround. Guidance also suggests lower revenues per seat in the first half and unimpressive yields through the key summer season which went down particularly badly, peers Ryanair and Wizz Air 2-3% south too.

In fact, easyJet results have been the reason for a poor second half of the week for the sector as a whole, IAG down 5% Thurs-Fri and losses of 11-13% for fellow flag carriers Lufthansa and Air France-KLM as investors reassess the sector (including more budget transatlantic competition from next year) in light of strong year to date performance (20% to 50% gains; 125% for Air France!). While the UK 100 index of blue chips has put on a respectable 1%.

As we said last week the drivers for share price moves are not always immediately obvious. Sometimes it’s easy and stock specific (company news). Sometimes it’s read-across (peer news). In some cases it needs detective work (UK credit card charge ban). But that’s our job – to decipher the markets quickly and help you, the client, understand what’s going on. So you can make profitable trading decisions.

As we suggest each week, allow myself and my team to assist you in trading/investing what you want, how you want and when you want. Get access to our research – award winning in case you weren’t aware – and stay fully informed of the news that is important to you and stay ahead of the game.

Have a great weekend,

Mike van Dulken, Head of Research, 21 July 2017