DAVY VIEW

The pertinent question for the network airlines, which transfer passengers through large hubs connecting long-haul destinations, is whether they can recover and, if so, how long will this take. Inter-continental and corporate travel look certain to recover later than continental/leisure travel. We have revised our estimates for the three main European network airlines. All are restructuring (plan to be 33% to 20% smaller in 2021) and will have a future focus on deleveraging and repairing balance sheets. We don’t know yet whether their restructurings will enhance or weaken competitive positioning when we see other global airlines restructuring. We maintain our ‘Underperform’ rating on both Air France KLM and Lufthansa but downgrade IAG to ‘Neutral’ with its highly dilutive rights issue to come in September.