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Green light from the markets for carriers

State aid and a rapid recovery in demand push air transport stocks

Financial newspapers around the world have gotten into different articles but all in the same direction: the stock market for carriers is clearly on the rise. The examples - AVIONEWS writes it- are global: from France where Air France, with help of over EUR 7 billion, has regained strength, to the United States where giants such as Delta, United and American Airlines have reversed the trend of the last few months and started again to go up to the various stock markets.

In Europe, the ordinary Lufthansa share, financial commentators write, in two days it regained 15% of its value after the government promised to inject the extraordinary amount of EUR 9 billion into the already thriving bank accounts of the company.

It is from mid-May that all the stocks of the companies have started to rise again, precisely in correspondence with extraordinary government interventions. But actual demand is struggling to restart Southwest Airlines in the United States has had to admit that "although there is a turnaround in reservations with a growth perhaps higher than estimated, it is still far from pre-crisis levels and it is not possible to estimate when those levels will be reached". Optimists are looking at the number of cancellations which, they say, have fallen sharply. But someone replies that they have fallen for the sole reason that there is nothing left to erase now.

All those who had booked and paid for flights have already cancelled them, where possible, and are waiting to receive a refund in cash or in other travel vouchers. Legal disputes, which no one seems to want to look at, risk multiplying. The companies try to hold on and return vouchers rather than money, but the legal provisions are quite clear and difficult to circumvent.

On the other hand, at this moment the airlines want everything rather than depriving themselves of liquid money, weakening their financial position even more and depriving themselves of reserves that would perhaps allow a safer survival and restart.

Some financial commentators went as far as banality by stating: "companies will survive. They have the ability to recover, but this takes time and in this time they will burn huge financial resources".

Affirmations that it is not difficult to share, what is more complex is to estimate the time necessary and the best structure to overcome this gap.

Nobody then ventures to evaluate what the presence of States within the companies will entail, especially with regard to future investment decisions and personnel management policy: from new hires to interventions to reduce the number of employees.

Areas in which -AVIONEWS said it- a State can have different and various objectives than that of a private company.

Then there is the question of competition.

Will carriers excluded from national aid stand by and watch others thrive while they have to cope with financial problems of all kinds?

Hard to believe that none of them make not decide to go to the international courts to get a part of the cake. In an extremely optimistic way, then many look to the promises of opening the various borders that Nations dependent on tourism such as Spain have already predicted for the first of July.

Will it be possible for everyone to keep these promises? Will a reappearance of the epidemic, which is not absolutely impossible, not force everyone to re-tighten the rules?

In a word, from an exquisitely technical point of view, we seem to be able to say that, as on many other occasions, the stock market is moving (incredible to call itself Editor's note) more on feelings and hopes than on actual operational realities.

There is no doubt that air transport will return to pre-epidemic levels, but many technical indicators tend to say the timing of this recovery will be neither short nor certain. In this period, those who have large and possibly renewable financial reserves will survive, but who, in addition to this, will be able to implement the best strategies to minimize the effect of the crisis and perhaps remodel the company's business model by shifting the balance between short and long range or between passenger and freight flights.

In addition, the difficulties of many companies will open unexpected and extremely lucrative spaces to the strongest ones that will be able to grab slots on sections so far saturated.

It is no coincidence that many are already flying in dry loss flights with practically no passengers in order not to lose the slots they own.

In addition to adding capital to the finances of each airline, governments will have the temptation to change the rules that allow to defend the operating spaces of national companies, but this generates market imbalances that few will want to accept.

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AVIONEWS - World Aeronautical Press Agency
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