Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

<ul>
<li>Given events in the Middle East and associated risks for oil prices, we publish a quick guide to the 2024 earnings sensitivity to fuel price increases for the European airlines.</li>
<li>Rising fuel prices pose starkest risk to Lufthansa earnings, and it has just profit warned due to strike costs, which leave it needing a record 2H to meet guidance.</li>
<li>Ryanair is comfortably most insulated given margin and balance sheet strength.</li>
</ul>


Given events in the Middle East and associated risks for oil prices, we publish a quick guide to the 2024 earnings sensitivity to fuel price increases for the European airlines.
Rising fuel prices pose starkest risk to Lufthansa earnings, and it has just profit warned due to strike costs, which leave it needing a record 2H to meet guidance.
Ryanair is comfortably most insulated given margin and balance sheet strength.


European Airlines - Assessing Fuel Price Risk to Earnings

<ul>
<li>We forecast €2.6bn Adjusted EBIT in 2024, below management guidance of €2.7bn, given concerns about margin management as capacity increases 12% yoy.</li>
<li>Detailed analysis of the margin gaps and key drivers of gaps at each of Lufthansa's airlines illustrates remedial work required with new perspective.</li>
<li>Bringing each portfolio company towards the Group Adjusted EBIT margin target of &gt;8% would represent the CEO's finest achievement (apart from helping save the company through COVID).</li>
</ul>


We forecast €2.6bn Adjusted EBIT in 2024, below management guidance of €2.7bn, given concerns about margin management as capacity increases 12% yoy.
Detailed analysis of the margin gaps and key drivers of gaps at each of Lufthansa's airlines illustrates remedial work required with new perspective.
Bringing each portfolio company towards the Group Adjusted EBIT margin target of &gt;8% would represent the CEO's finest achievement (apart from helping save the company through COVID).


Lufthansa – Portfolio Carrier Catch up Requirements Analysed

<ul>
<li>We refresh estimates on AF-KLM, IAG, Lufthansa following Singapore Airlines's effective profit warning, noting higher fuel prices make margin protection more difficult.</li>
<li>Our 2024 EBIT estimates are 7% ahead of consensus at €2.0bn for AF-KLM, 6% ahead at €3.6bn for IAG and 5% behind at €2.5bn for Lufthansa.</li>
<li>Lufthansa has highest-in-class capacity growth, with its biggest focus on APAC while APAC yield weakness prompts margin management concerns as ground handlers strike.</li>
</ul>


We refresh estimates on AF-KLM, IAG, Lufthansa following Singapore Airlines's effective profit warning, noting higher fuel prices make margin protection more difficult.
Our 2024 EBIT estimates are 7% ahead of consensus at €2.0bn for AF-KLM, 6% ahead at €3.6bn for IAG and 5% behind at €2.5bn for Lufthansa.
Lufthansa has highest-in-class capacity growth, with its biggest focus on APAC while APAC yield weakness prompts margin management concerns as ground handlers strike.


European Airlines - Difficult to Avoid Long Haul Earnings Declines in 2024

Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, Event-driven

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

The European Benchmark Indices (BMI) of the STOXX Index family are reviewed on a quarterly basis in March, June, September and December. In this insight, we take a look at the potential adds and deletes for the next review which will take place in December 2021 for the STOXX Europe 600 Index and the EURO STOXX Index. The STOXX Europe 600 Index is a benchmark index with a fixed number of 600 components representing large, mid and small capitalization companies across 17 countries of the European region. The EURO STOXX Index is a subset of the STOXX Europe 600 Index and is also the parent index for one of the most widely tracked blue-chip indices in the Eurozone ("EURO STOXX 50"), which is rebalanced once a year in September. <div>More below the fold.</div>

The European Benchmark Indices (BMI) of the STOXX Index family are reviewed on a quarterly basis in March, June, September and December. In this insight, we take a look at the potential adds and deletes for the next review which will take place in December 2021 for the STOXX Europe 600 Index and the EURO STOXX Index. The STOXX Europe 600 Index is a benchmark index with a fixed number of 600 components representing large, mid and small capitalization companies across 17 countries of the European region. The EURO STOXX Index is a subset of the STOXX Europe 600 Index and is also the parent index for one of the most widely tracked blue-chip indices in the Eurozone ("EURO STOXX 50"), which is rebalanced once a year in September. More below the fold.

STOXX Europe Indices: Quiddity Leaderboard for December 2021 Rebalance

International Consolidated Airlines Group / Equity Bottom-Up

International Consolidated Airlines Group

<ul>
<li>We publish quarterly earnings bridges through 1Q-4Q24 for Air France-KLM, IAG and Lufthansa, which illustrate 1Q will be difficult yoy.</li>
<li>This renders forward commentary extremely important and summer pricing prospects are encouraging. Delta kicks off airline reporting season globally on 10 April and is likely to set a bullish tone</li>
<li>However the European low cost carriers easyJet, Ryanair and Wizz Air are seeing greater earnings momentum than the flag carriers given short haul fare strength.</li>
</ul>


We publish quarterly earnings bridges through 1Q-4Q24 for Air France-KLM, IAG and Lufthansa, which illustrate 1Q will be difficult yoy.
This renders forward commentary extremely important and summer pricing prospects are encouraging. Delta kicks off airline reporting season globally on 10 April and is likely to set a bullish tone
However the European low cost carriers easyJet, Ryanair and Wizz Air are seeing greater earnings momentum than the flag carriers given short haul fare strength.


European Airlines – Bridging Flag Carrier 1Q24 and 2024 Prospects

Germany

Deutsche Lufthansa Aktiengesellschaft provides passenger and cargo air transportation services worldwide. The Company offers flight and connection programs in North America, Scandinavia, and Asia. Deutsche Lufthansa also provides travel agency, catering, and aircraft maintenance services.

Deutsche Lufthansa (LHA GR)

European Airlines - Assessing Fuel Price Risk to Earnings

Detailed historical and forward looking analysis on the European airline sector's ability to manage fuel price headwinds/volatility.

Neil Glynn

Lufthansa – Portfolio Carrier Catch up Requirements Analysed

Deep dive into the margin gaps at each portfolio company versus the Group target of Adjusted EBIT margin of >8%, to illustrate the remedial work...

Neil Glynn

European Airlines - Difficult to Avoid Long Haul Earnings Declines in 2024

Deep dive on European flag carrier earnings prospects in 2024 featuring quarterly earnings bridges, in-depth fare and capacity growth analysis.

Neil Glynn

STOXX Europe Indices: Quiddity Leaderboard for December 2021 Rebalance

A look at the potential adds and deletes for the December 2021 index review for the STOXX Europe 600 Index and the EURO STOXX Index.

Janaghan Jeyakumar, CFA

European Airlines – Bridging Flag Carrier 1Q24 and 2024 Prospects

Deep dive on quarterly earnings prospects for the European flag carriers through 2024 illustrates 1Q difficult and forward commentary crucial to...

Neil Glynn