The pandemic has been devasting for airline stocks like IAG and Easyjet. Last year the number of passenger aircraft in service fell from 23,500 to 16,500 by year end. Despite airlines cutting the number of planes in active service, passenger loading fell to an an average of 60%, which is a level not seen since the 1996.
So it will come as no surprise that the share price of Easyjet is down 40% since the pandemic started. IAG stock has also tumbled 60% over the course of a year. Both companies experienced slumps in revenue in 2020 and issued sizeable amounts of debt to generate cash flow. IAG announced it had received an additional £2.5 billion in debt finance, and will not be paying dividends before the end of 2023. Last month Easyjet signed up for a £1.5 billion 5 year loan, bringing the total raised during the pandemic to £4.5 billion.
Considering only the short term pain of IAG and Easyjet makes it easy to forget that industry growth was healthy before COVID struck. 2017, despite thousands more aircraft taking to the skies, industry load factors were more like 80%. We suspect that the new home working culture will eat away at business travel, and long haul flights will be taken with reluctance for a while, but eventually, people will take to the skies in hoards again.
So Who Would I Pick?
There are 4 UK airline stocks on the London Stock Exchange, with varying results over the last year;
IAG has lost 60% of its value.
Easyjet down 40%
Ryanair Ryanair’s share price has risen 6%
Wizzair share price is up 15%
Easjet and Ryanair are short haul market competitors, but Ryanair has a stronger balance sheet. IAG is restructuring to compete with these airlines domestically, which is possibly a risky move. Its long haul routes will probably take longer to recover fully, if at all. Short haul competition between Ryanair, Easyjet, and IAG is likely to be fierce. For this reason, I would buy Wizzair. It is based in Eastern Europe and serves a slightly different market than the other three, mean less compatiion and more chance of generating a better cash flow..