European Airline Share Rout Continues on Oil Hedging, Coronavirus Fears
February 26 2020 - 9:46AM
Dow Jones News
By Caitlin Ostroff
European airlines' shares were on track for their biggest weekly
declines in years, as investors feared they could be hurt more
severely by falling oil prices than their U.S. counterparts.
A slide in oil prices since the beginning of the year could mean
European airlines pay more for jet fuel than American carriers.
Most airlines in Europe are locked into contracts that set out how
much they pay for oil over the next one to two years, said Adrian
Yanoshik, a transportation equity research analyst at Berenberg
Bank. U.S. airlines don't have such hedges in place.
Brent crude oil, the global benchmark, fell 1.5% to $53.45 on
Wednesday on fears that the coronavirus's spread to Europe could
further crimp demand for oil.
Shares in Ryanair Holdings PLC and easyJet PLC fell 3% and 2.1%,
respectively. Both have declined more than 15% this week, on track
for their worst week in a decade, largely because of concerns among
investors that the viral outbreak will hurt demand for travel. Both
airlines are widely dependent on Europe for revenue.
Coronavirus cases in Europe have continued to climb, with Italy
reporting 105 new cases on Tuesday, according to the World Health
Organization. Greece, Switzerland and Oman reported their first
cases as well. "The shares now are pricing in more of a widespread
impact," Mr. Yanoshik said.
Shares in U.S. airlines have also fallen this week. When flights
to China are canceled, many larger aircraft are reallocated to
domestic flights, increasing capacity for those flights and likely
driving down prices. This has started to have a knock-on effect on
shares of more U.S.-focused carriers.
"As a group, it is starting to price some sort of domestic
impact as well," Mr. Yanoshik said. "The fact that Southwest is
down as well is kind of indicative of that." Shares in Southwest
Airlines Co. have fallen 12% this week.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
February 26, 2020 09:31 ET (14:31 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Ryanair (NASDAQ:RYAAY)
Historical Stock Chart
From Aug 2024 to Sep 2024
Ryanair (NASDAQ:RYAAY)
Historical Stock Chart
From Sep 2023 to Sep 2024