The airline summer conundrum: don’t fly or fly to the same places

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European investors who want to hit Greek beaches this summer probably have more options than ever before. This is a reason to think twice before buying shares in the airlines that take them there.

German aviation group Lufthansa on Thursday reported positive free cash flow for the first time since the start of the pandemic, while confirming second quarter earnings were in line with what analysts expected – a loss of 850 million euros, equivalent to approximately $ 1 billion. Almost all of the major European carriers have met or exceeded these forecasts, as Covid-19 vaccines have paved the way for a return to economic normality.

However, that did not give stocks a boost: Lufthansa shares fell more than 2% on Thursday and the airlines subsector of the Stoxx Europe index fell 7% in the three last months. Only the very low cost carriers Ryanair and Wizz Air hold their own in the stock market, simply because they have the greater ability to quickly pivot to the latest hot destinations, as travel rules change. Ryanair has more flights to Greece this summer than ever.

Unfortunately, there may not be a foolproof way for investors to play the European summer reopening.

Lufthansa’s profits remained on target due to its budget arm Eurowings. The unit recorded operating losses 18% lower than analysts had expected, both due to the rebound in demand on short-haul and the Covid-19 crisis allowing the implementation implementing long overdue cost reductions. In contrast, the flagship division of Network Airlines did 12% worse than expected.


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