over 3 years ago • 2 mins
Morgan Stanley wants to let investors play among the stars (or at least the stratosphere): the bank’s analysts reckon now’s the time to buy US airline stocks 🇺🇸
The Chairman of the Board (or at least the transport research team) sees a future in which coronavirus vaccines bring airline passengers back in bulk. In fact, Morgan Stanley predicts demand could return to pre-pandemic levels by late 2021 – two years sooner than most other forecasts. Against that backdrop, the investment bank’s betting domestic airlines with shorter routes and cheaper fares will recover first – and that those which were either previously very profitable or on that trajectory will end up back on top.
All the same, Morgan Stanley warned that a worsening pandemic could drive desperate carriers to slash prices – potentially causing a race to the bottom that would hit everybody’s profits 🔪 That risk may be why billionaire investor Warren Buffett sold all his airline stock holdings four months back…
The bank recommended on Tuesday that investors looking to follow its lead buy into both low-cost US carriers and the strongest of the country’s so-called “legacy” airlines – which its analysts believe is Delta Air Lines ✈️ Investors across the Atlantic, meanwhile, might be minded to board the likes of Ryanair and Wizz Air: they’re currently adding more planes to their fleets even as larger European rivals struggle. Not only should demand for their short-haul routes recover faster than for rivals’ intercontinental fares, but they’ve also got more cash on hand.
Some previously profitable high-flyers are running on fumes after six months up in the air. Troubled European airline group IAG – owner of Iberia and British Airways – is hoping to raise $3 billion from existing investors in order to help it weather the storm: it’s still only flying at 20% of its pre-pandemic level, with hefty overheads burning through $26 million a day.
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