In June last year my university friend invited me to help open her summer house on Lago Iseo, Northern Italy, at the foothills of the Alps near south eastern Switzerland. Her family is from the region, and they came and went, all ages, swimming, cooking, mucking around, eating and chatting – some in local dialect.
After a simple lunch on the curving terrace at the water’s edge, we were clearing up, she fiddling with the slippery plastic bags for food waste, me with the empty bottles, others grappling with the labyrinthine recycling system. I didn’t have the heart to tell her that 20 years of this wouldn’t undo the damage done by her return Ryanair flight from Stansted to Bergamo.
Pondering the fate of the airline industry, I am indebted to a Bloomberg journalist and the Swedish people for giving a name to my uneasy feelings: ‘A flying shame’. Year-on-year passenger numbers in the Nordic nation have fallen for seven consecutive months and train journeys are at a new record high (32m). Like the internal combustion engine and vehicles, jet engines’ days might be numbered too. Let’s look at a random sample of airline-related share prices, not forgetting the famous adage: “The airline industry, in its history, has never made money’’.
So many bankruptcies, takeovers and state bailouts mean few have long-term share price charts. Hong Kong’s Cathay Pacific (HK:0293) has form here, with rather unsteady progress since 1985. Midway between 2009’s low at HK$7 and record high around HK$24, it looks cheapish.
Ryanair is one of the most successful budget airlines, reflected in share price action since 2009. It has suffered badly over the past 18 months, halving from almost €20. Cheap again today, but the chart pattern might be a head-and-shoulders top; prefer to avoid.
Across the Atlantic, JetBlue (US:JBLU) was also a young price-cutter in the vast domestic US flight market, then morphed into one of its biggest players. The chart hints that the shares struggle to hold over $25, but fairly neat consolidation in a massive right-angled triangle since 2015 hint it’s setting up for another upside test.
A related stock is Rolls-Royce (RR.), which has price history – and form. After a catastrophic collapse in 2014-15 the chart dusted itself off, picked up the pieces and put on some seriously steady price gains since; looking good.
Airports themselves might be at risk. Dubai International Airport in 2018 handled 89.1m passengers, up just 1 per cent on the previous year and the weakest annual growth in at least a decade – admittedly after 15 good years. A hub for Emirates and a tourist destination, this is a problem.
The writing might be already on the wall because this month two huge new terminals were launched. Jewel Changi Airport in Singapore cost $1.25bn and is a pre-security attraction with a circular waterfall and jungle at its heart. Its 280 retail and dining outlets, hotel and multiplex cinema are testament to gaudy luxe. Istanbul, where Turkish Airlines ballooned over the past 10 years as a short-haul hub between Europe, Asia and Africa, has a totally new facility on the Black Sea, billboards pronouncing: “This is not just an airport. It’s a monument to victory.’’ When finished, it will have six runways and four terminals able to handle 200m passengers. One of President Erdogan’s “crazy projects’’ – who thinks big!
