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雷达卡
We think the markets have got it right
Share prices of network carriers have declined as the market prices in $90 oil and
anticipates a slowdown in premium traffic. We believe premium traffic growth will
slow and think the market has got it right, despite the companies’ protestations that
we are in a developing market driven super-cycle.
We upgrade Air France-KLM and British Airways from Sell to Hold
Air France is trading relatively close to our price target, and British Airways is below
our previous target. We therefore upgrade both stocks from Sell to Hold. We continue
to prefer Lufthansa, maintained at Hold, amongst the Euromajors, thanks to the
strong performance of swiss and the opportunities for portfolio management. We
maintain Iberia and Finnair at Buy, two carriers, in our view, with sustainable
competitive advantages in their key long-haul markets, less exposed to financial
markets traffic.
Too early to go bargain hunting
As the basic rule, you should pick up airlines when times are tough. Plainly the
network carriers share prices have declined considerably over this year, but they
continue to report serene trading. We do not think this situation can endure. Once
the carriers announce weakening premium traffic and softening yields (as we believe
they will), at that time we expect to see estimates tumbling and only then would we
consider recommending in the European majors.
Low-cost carriers more robust
We see a more optimistic outlook for low-cost carriers. A consumer slowdown should
encourage down-trading by consumers. We see the main quoted low-cost carriers
facing a benign competitive outlook with consolidating charter airlines and secondtier,
low-cost carriers, and soft comparison data next summer. We maintain Buys on
easyJet and Ryanair, downgrading Air Berlin from Buy to Hold on concerns over
execution risk.
Contents
A I R L I N E S 4 D E C E M B E R 2 0 0 7 2
I N D U S T R Y D Y N A M I C S
Hold as a default 3
We take Hold as a default recommendation, given high volatility and poor industry
visibility. We maintain Buys on easyJet and Ryanair, as well as on Iberia and
Finnair, where we see sustainable competitive advantage.
Premium traffic trends 4
Estimate revisions: factoring in a $90/bbl oil 5
V A L U A T I O N C O M M E N T
Valuation 8
We attempt to value airlines using a three-stage DCF and ratios, but share prices
are driven by news flow and sentiment, which we believe will weaken from here
as premium traffic growth slows.
Valuing airlines – an art, not a science 8
A P P E N D I X
Airline models 11
C O M P A N Y P R O F I L E S
Air Berlin 19
Air France-KLM 23
British Airways 29
Deutsche Lufthansa 32
easyJet* 37
Finnair 42
Iberia 45
Ryanair 52
SAS 57
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