Lufthansa experiencing recovery in traffic; easyJet slips on analyst downgrade; eurofly down


European airline shares were mixed again on Monday (24-May-2010) as wider markets gained, following an improvement in US stocks on Friday (21-May-2010). However, the banking sector continued to fall on concerns over the potential impact of the Bank of Spain's bailout of CajaSur.

In key markets, UK’s FTSE (+0.1%) gained, France’s CAC was flat and Germany’s DAX (-0.4%) slipped.

British Airways gains on first day of strike action; TUI and Thomas Cook benefit

British Airways (+0.9%) gained as cabin crew launched their first day of strike action on Monday. Davy Stockbrokes analyst, Stephen Furlong, told Reuters, investors are more concerned with BA’s underlying business, rather than the strikes. He noted trading conditions are improving, with the carrier on Friday forecasting it would break even this year. See related report: British Airways completes woeful year for Europe’s Big Three. Outlook brighter

Other UK travel groups, including TUI Travel (+0.7%) and Thomas Cook Group (+0.3%) rose during the session as passengers look to alter their bookings during the strike action. 

Lufthansa experiencing recovery in traffic

Lufthansa was flat, despite stating over the weekend that it is experiencing a recovery in traffic levels across its network, thanks in part to marketing efforts and pricing strategies to stimulate demand. The carrier is witnessing a particular return in business traffic, although it expects premium demand will have a slow and protracted recovery.

easyJet slips on analyst downgrade

easyJet (-0.4%) slipped after its share rating was cut from "overweight" to "equal-weight" by Morgan Stanley. The analysts stated the market will require clarity over fleet development and brand licence issues.

easyJet founder, Sir Stelios Haji-Ioannou, reportedly offered to drop the dispute over the use of the "easy" brand if it agrees to pay GBP3 million a year in royalties. The payment would equate to 0.1% of the airline’s annual revenue. The dispute is over an agreement made in 2000 where easyJet was to retain 75% of revenues, while easyGroup (owned by Mr Haji-Ioannou), would retain 25% of revenues made from additional or non-core services. Mr Haji-Ioannou, still controls 38% of the carrier. He made the proposal to the board in Apr-2010 ahead of a High Court battle due to commence 08-Jun-2010.

Morgan Stanley also adjusted its financial result estimates downwards for the carrier for FY2010 to FY2012, due to "higher fuel costs and weaker currency assumptions".

See related report: Stelios goes, easyJet grows. What is uneasyJet’s best strategy? What would Sun Tzu do?

Elesewhere, Eurofly (-4.9%) and Vueling (-2.5%) declined with a 1.3% slump in Spain’s IGBM index. El Al (-2.8%) was also down. Turkish Airlines (+2.5%) and Iberia (+2.4%) were the day’s biggest gainers. Iberia rose after British Airways commented on Friday that it expects the carriers’ merger agreement to be completed by year-end. 

Europe Airline Daily reports the very latest on what’s happening in the European aviation market, including news on routes, fleets, traffic and financials. Stories featured in today’s issue include:

Europe selected airlines daily share price movements (% change): 24-May-2010

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