This weekend will be one of the busiest periods of the summer at airports as hundreds of thousands of people depart for their annual break.
Queuing for a coffee or to board the plane, some travellers will be focused solely on their plans for fun in the sun.
But holidaymakers whose other passion is investing will also be looking for indications of the health of the stock market-quoted British and Irish airlines.
They are: IAG (owner of British Airways and Iberia); easyJet; Jet2; Ryanair; and Wizz Air.
Do the crowds mean that shares in these companies are poised to be up, up and away?
The Jet2 jingle ‘Nothing Beats a Jet2 Holiday’ has turned into a massive social media hit – in a response said to reflect the nation’s longing for a getaway amid economic gloom.
Taking off: Since the start of the year, IAG shares have soared by 23 per cent, although they remain 32 per cent below their level a decade ago
And there is evidence the British are prioritising holidays, too. Earlier this month Luis Gallego, chief executive of IAG, whose empire also includes Aer Lingus and Vueling, said: ‘We continue to benefit from the trend of a structural shift in consumer spending towards travel.’
In the depths of the pandemic in October 2020, IAG shares were 91p. Yesterday, they were 373.7p. Gallego’s confidence was underlined by IAG’s first-half profits which leapt by 44 per cent to €1.9billion (£1.65billion). Total revenues rose by 8 per cent to €15.9billion (£13.8billion).
There has been a pick-up in premium transatlantic trips, which is boosting British Airways’ Rask (revenue per available seat kilometre), a key metric.
Gallego envisages ‘good earnings growth, margin progression and strong returns to shareholders this year’. But he also highlighted ‘the ongoing uncertainty that may result from the geopolitical and macroeconomic backdrop’.
This confident tone may come as a surprise, given the array of external challenges that beset airlines. Richard Hunter, of Interactive Investor, cites a few: ‘Virus outbreaks; industrial action; volcanic dust clouds; higher fuel costs; and technical outages.’
But people’s attachment to vacations may serve as a signal to rethink your attitude to the sector. If you want to jump on board, these are the airlines that the experts think are worth backing.
IAG
Since the start of the year, IAG shares have soared by 23 per cent, although they remain 32 per cent below their level a decade ago.
Interactive Investor’s Hunter is cheered by the reintroduction of a dividend and the reduction in debts. During the pandemic, the group borrowed heavily to ensure its survival.
However, despite IAG largely leaving this era behind, some effects linger. Virtual meetings, the norm during lockdowns, have continued, meaning a decline in business travel.
Analysts expect IAG’s recovery to gather pace. Eight of the 16 analysts who follow the stock rate IAG a ‘buy’ while another seven consider the shares worth holding. The average target price is 488p.
EASYJET
Shares are down by 4 per cent this year to 507.6p, which seems largely due to the third-quarter results unveiled last month.
Revenues grew by 9.7 per cent to £2.9billion and profits rose by 21 per cent to £286m. EasyJet’s holiday division is expanding, too, which should be good news for its Rask.
Yet investors were more preoccupied with other factors, such as the bill for an air traffic controller strike in France, a leap in fuel costs and a move to later booking. As a result, 11 of 19 analysts rate the shares a ‘hold; for the rest the shares are a ‘buy’.
If you are prepared for some ups and downs, Derren Nathan of Hargreaves Lansdown argues that easyJet’s potential for growth is not reflected in its current valuation.
JET2
Hitting the right note: Jet2’s advertisement features Jess Glynne’s hit Hold My Hand
The direction of the share price of this Leeds-based airline has not followed the rave reception for its advertisement which features Jess Glynne’s hit Hold My Hand.
Hollywood star Jeff Goldblum even made his own version of the advert, calling it Jeff2 Holiday.
Since January, the shares have edged up by just 4 per cent to 1632p, although profits for the year to March rose by 11 per cent to £578m.
Chief executive Steve Heapy said last month that demand is up among all demographics and it is endeavouring to cater for a younger clientele with more affordable offers.
Analysts seem to agree that this strategy will win over customers who are organising an overseas jaunt at the last moment.
The majority rate the shares in the £3.4billion AIM-listed company a ‘buy’, with an average target price of 2164p.
Maybe Goldblum will add some to his portfolio?
RYANAIR
This week Ryanair, Europe’s largest airline, announced that its passenger numbers reached a record 20.7m in July, although the Dublin-based carrier was forced to cancel more than 600 flights due to the air traffic control strikes in France.
This followed the news last month that its profits for the first quarter more than doubled to €820m (£711m), while revenues leapt by 20 per cent to €4.3billion (£3.7billion).
The optimistic tone of these announcements is at odds with the usual litany of complaints over the late delivery of planes from Boeing and much else from the rambunctious Ryanair boss Michael O’Leary.
But he has reasons to be cheerful, having qualified for a €100m (£86.7m) bonus thanks to the much-improved share price.
It has soared by 74 per cent over the past year to €26 (£22.54).
Analysts believe that O’Leary will deliver for investors as well as himself. They rate the shares a ‘buy’, with one analyst targeting a price of €30 (£26).
WIZZ AIR
The Eastern Europe-focused budget carrier is based in Budapest but listed in London.
At 1418p, its shares are 5 per cent lower than at the start of this year, having plunged in June when the company revealed a 40 per cent drop in profits.
This was mostly caused by the grounding of about a fifth of its Airbus planes due to persistent problems with the Pratt & Whitney engines.
Last month, chief executive Jozsef Varadi said that the company would be scaling back its growth plans. He is abandoning expansion in the Middle East because the region’s dry air exacerbates the engine issues.
Unsurprisingly, most analysts consider Wizz to be a hold, although Deutsche begs to differ, having upgraded the shares to a ‘buy’ in the past fortnight.
The international set
Tariff fears are weighing on US carriers. These companies are also dealing with an oversupply of flights, as customers become more price-sensitive.
American Airlines shares are 33 per cent lower than at the start of the year, for example.
But Delta and United are faring better thanks to the clamour for premium travel.
United is investing in its Polaris premium service, planning to open more lounges for top-tier travellers. Analysts rate United shares, which currently stand at $89.87 (£66.85), a ‘buy’.
America’s ultra-wealthy are increasingly underlining their status by using more private jets. But some also favour a carrier that provides something similar to the private jet experience in its first class cabin.
Shares in Air France-KLM, which is listed in Amsterdam and Paris, have soared by 64 per cent this year thanks to the clever and lavish redesign of its La Premiere first class cabin with its private jet feel.
A one-way ticket from New York to Paris costs between $10,000-$20,000 (£7,440 to £14,880). This is the luxe way to embark on that Emily In Paris escapade.
Other airlines will doubtless be competing more for the holiday and business travel budgets of those people with very deep pockets. Premium seems like the way to go.
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