Could EasyJet benefit from Monarch’s demise?

Graham Spooner, investment research analyst at The Share Centre, explains what the collapse of Monarch Airlines could mean for personal investors interested in the airline sector.

Could EasyJet benefit from Monarch’s demise?

EasyJet was up over 3% in early trading yesterday on the back of the demise of Monarch, the UK’s fifth largest airline. With the poor press that Ryanair are currently getting and in view of their ongoing problems, EasyJet could be the best placed to benefit.

The collapse of Monarch may alleviate some of the pressure on over-capacity in the sector, while also enabling remaining companies to massage the prices on certain routes higher.

However investors should appreciate that the sector is likely to remain difficult for operators, with continued pressure from new entrants such as Norwegian and the recent backdrop of the 25% rise in the oil price since June.  Operators will be hoping that that trend does not continue.

Other pressure points are of course Brexit, the weak pound and the threat of terrorism.

Our pick in the sector remains British Airways owner International Consolidated Airlines (IAG), which we feel should continue to benefit from restructuring that took place a few years ago. Although not directly involved at the cheaper end of the market IAG has already expressed interest in taking some of Monarch’s slots, planes and staff.

 

Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest and tax policies may change.

 

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