[et_pb_section fb_built=”1″ admin_label=”section” _builder_version=”4.16″ custom_padding=”||2px|||” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||” theme_builder_area=”post_content”][et_pb_text admin_label=”Text” _builder_version=”4.27.7″ header_2_font_size=”25px” header_2_line_height=”1.2em” background_size=”initial” background_position=”top_left” background_repeat=”repeat” hover_enabled=”0″ border_color_bottom=”#93642e” global_colors_info=”{}” theme_builder_area=”post_content” text_font_size=”20px” sticky_enabled=”0″]<\/p>\n
European airlines are showing signs of recovery, with profits back at 2018 levels. However, high leverage is undermining their financial resilience. An investment in these bonds therefore requires careful consideration, especially given the currently low risk premiums.<\/p>\n
[\/et_pb_text][et_pb_text _builder_version=”4.27.7″ _module_preset=”default” header_3_font=”|700|||||||” header_3_font_size=”20px” hover_enabled=”0″ global_colors_info=”{}” theme_builder_area=”post_content” text_font=”Celias – medium||||||||” text_font_size=”21px” sticky_enabled=”0″]<\/p>\n
European Airlines: Profits and Improved Ratings After the Pandemic<\/p>\n
[\/et_pb_text][et_pb_text _builder_version=”4.27.0″ _module_preset=”default” header_3_font=”|700|||||||” header_3_font_size=”20px” custom_padding=”||20px||false|false” global_colors_info=”{}” theme_builder_area=”post_content”]The recovery of European airlines has reached a significant milestone following the COVID-19 pandemic. As of the end of 2023, all airlines represented on the European credit market posted profits for the first time since 2019. This is primarily due to the ongoing recovery in the tourism sector, despite the energy crisis and inflationary environment.<\/p>\n
Some companies even managed to exceed their 2018 profits, with the continued improvement in their financial position leading to rating upgrades. Particularly noteworthy is the return of IAG and Lufthansa to investment-grade ratings after they were temporarily classified as high-yield companies during the crisis. Both companies have issued bonds in recent weeks for the first time since 2021.[\/et_pb_text][et_pb_image src=”https:\/\/ha-gim.com\/wp-content\/uploads\/2024\/07\/2024.07.05_Airlnes_EUR_IG.png” title_text=”2024.07.05_Airlnes_EUR_IG” _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” theme_builder_area=”post_content” align=”center” sticky_enabled=”0″][\/et_pb_image][et_pb_text _builder_version=”4.27.0″ _module_preset=”default” header_3_font=”|700|||||||” header_3_font_size=”20px” custom_padding=”||20px||false|false” global_colors_info=”{}” theme_builder_area=”post_content”]Despite these positive signals, we believe the airlines\u2019 financial stability remains a challenge. In particular, their equity position relative to debt remains significantly weaker, while the sector average of 73% is still notably elevated and far from pre-COVID-19 pandemic levels.[\/et_pb_text][et_pb_text _builder_version=”4.27.7″ _module_preset=”default” header_3_font=”|700|||||||” header_3_font_size=”20px” hover_enabled=”0″ global_colors_info=”{}” theme_builder_area=”post_content” text_font=”Celias – medium||||||||” text_font_size=”21px” sticky_enabled=”0″]<\/p>\n
Hardly Any Equity Buffer Left<\/p>\n
[\/et_pb_text][et_pb_image src=”https:\/\/ha-gim.com\/wp-content\/uploads\/2024\/07\/csm_2024.07.05_Airlines_Industrie_8ace1e561c.png” title_text=”csm_2024.07.05_Airlines_Industrie_8ace1e561c” _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” theme_builder_area=”post_content” align=”center” sticky_enabled=”0″][\/et_pb_image][et_pb_text _builder_version=”4.27.7″ _module_preset=”default” header_3_font=”|700|||||||” header_3_font_size=”20px” hover_enabled=”0″ global_colors_info=”{}” theme_builder_area=”post_content” text_font=”Celias – medium||||||||” text_font_size=”21px” sticky_enabled=”0″]<\/p>\n
Does the Implicit Government Guarantee Protect Against Spread Widening?<\/p>\n
[\/et_pb_text][et_pb_text _builder_version=”4.27.0″ _module_preset=”default” header_3_font=”|700|||||||” header_3_font_size=”20px” custom_padding=”||20px||false|false” global_colors_info=”{}” theme_builder_area=”post_content”]The cyclical nature of demand, the high ratio of fixed costs, vulnerability to exogenous shocks, and, not least, the still elevated LTVs suggest that the sector\u2019s financial resilience is significantly weaker than that of the overall market.<\/p>\n
In our view, this is hardly reflected anymore in the current credit risk premiums, which have now fully converged with the overall market. We assume that investors now attribute an implicit government guarantee to the sector\u2014one that saved the airlines from bankruptcy during the last crisis.
In our view, this will not be able to protect the bonds from a widening of credit risk premiums but will only come into play at significantly higher levels. Therefore, at HAGIM, we emphasize the need for sound selection expertise to invest successfully in this challenging industry.[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.25.2″ _module_preset=”default” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_row _builder_version=”4.25.2″ _module_preset=”default” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_column type=”4_4″ _builder_version=”4.25.2″ _module_preset=”default” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_toggle title=”Risks” open_toggle_background_color=”RGBA(255,255,255,0)” closed_toggle_background_color=”RGBA(255,255,255,0)” icon_color=”#000000″ open_icon_color=”#000000″ _builder_version=”4.25.2″ _module_preset=”default” border_width_all=”0px” border_width_bottom=”1px” border_color_bottom=”#93642e” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n
Price losses due to rising yields and\/or increased risk premiums are possible. Even a total loss cannot be ruled out. Past performance is not indicative of future results, nor can future performance be guaranteed.<\/p>\n
[\/et_pb_toggle][et_pb_toggle title=”Disclaimer” open_toggle_background_color=”RGBA(255,255,255,0)” closed_toggle_background_color=”RGBA(255,255,255,0)” icon_color=”#000000″ open_icon_color=”#000000″ _builder_version=”4.27.0″ _module_preset=”default” border_width_all=”0px” border_width_bottom=”1px” border_color_bottom=”#93642e” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n
This marketing communication, as defined by the Securities Trading Act, is provided solely for informational purposes and should not be construed as personal investment advice, a recommendation, or a solicitation to buy, sell, or hold a financial instrument, or to adopt an investment strategy.<\/p>\n
The opinions and statements contained in this document reflect the current assessment as of the date of publication. The information provided does not constitute a complete analysis of all material facts relating to a country, region, or market.<\/p>\n
Any statements regarding market developments, returns, price gains, or other capital appreciation, as well as risk metrics, are merely forecasts for which we assume no liability. In particular, past performance, simulations, or forecasts are not a reliable indicator of future performance. Asset values may rise or fall.
All information has been carefully compiled, in some cases based on information from third parties. Individual pieces of information may, in particular due to the passage of time, changes in the law, or current market developments, prove to be no longer accurate\u2014or no longer fully accurate\u2014even at short notice, and may change at any time without prior notice.
Therefore, no warranty is provided as to the accuracy, completeness, or timeliness of any information. The information is based on our assessment of the current legal and tax situation. To the extent that tax or legal matters are addressed, the recipient should discuss these with their tax advisor or attorney.
Investments in financial instruments involve both opportunities and risks. HAGIM\u2019s policy on handling conflicts of interest is published online at www.ha-gim.com\/rechtliche-hinweiserechtliche-hinweise.
The information contained herein is intended solely for professional clients or eligible counterparties. This information document is not intended for U.S. citizens or persons permanently residing in the United States, nor may it be distributed in the United States.<\/p>\n
[\/et_pb_toggle][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"
European airlines are showing signs of recovery, with profits back at 2018 levels. However, high leverage is undermining their financial resilience. An investment in these bonds therefore requires careful consideration, especially given the currently low risk premiums.<\/p>\n","protected":false},"author":1,"featured_media":3049,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","_seopress_robots_follow":"","_seopress_robots_imageindex":"","_seopress_robots_snippet":"","_seopress_robots_primary_cat":"none","_seopress_robots_breadcrumbs":"","_seopress_robots_freeze_modified_date":"","_seopress_robots_custom_modified_date":"","_seopress_robots_canonical":"","_seopress_social_fb_title":"","_seopress_social_fb_desc":"","_seopress_social_fb_img":"","_seopress_social_fb_img_attachment_id":0,"_seopress_social_fb_img_width":0,"_seopress_social_fb_img_height":0,"_seopress_social_twitter_title":"","_seopress_social_twitter_desc":"","_seopress_social_twitter_img":"","_seopress_social_twitter_img_attachment_id":0,"_seopress_social_twitter_img_width":0,"_seopress_social_twitter_img_height":0,"_seopress_redirections_value":"","_seopress_redirections_enabled":"","_seopress_redirections_enabled_regex":"","_seopress_redirections_logged_status":"both","_seopress_redirections_param":"","_seopress_redirections_type":301,"_seopress_analysis_target_kw":"","_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[39,34],"tags":[],"class_list":["post-8251","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-high-yield","category-specialist-article"],"_links":{"self":[{"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/posts\/8251","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/comments?post=8251"}],"version-history":[{"count":2,"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/posts\/8251\/revisions"}],"predecessor-version":[{"id":8253,"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/posts\/8251\/revisions\/8253"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/media\/3049"}],"wp:attachment":[{"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/media?parent=8251"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/categories?post=8251"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ha-gim.com\/en\/wp-json\/wp\/v2\/tags?post=8251"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}