Welcome to the new morningstar.co.uk! Learn more about the changes and how our new features help your investing success.

Monarch's Collapse Boosts Rivals' Share Prices

Surge in easyJet, Ryanair and IAG shares is a sign of how much pressure the airline industry is under

James Gard 2 October, 2017 | 4:30PM

Monarch Airlines plane

The collapse of budget carrier Monarch Airlines over the weekend has provided a boost to listed rivals on Monday morning, which gives an insight into the ruthlessly competitive nature of an industry under extreme pressure.

Luton-based budget rival easyJet (EZJ) was the biggest riser on the FTSE 100 on Monday, rising nearly 5% to £12.74. The company’s shares hit a post-referendum low of just under 900p amid concerns over the currency impact of Brexit and the hit to British tourists visiting its key European routes.

After a few weeks of negative headlines over flight cancellations, Irish carrier Ryanair (RYA) saw its shares rise by nearly 4% to €16.90. Morningstar columnist Rodney Hobson pondered last week why Ryanair shares have not fallen further considering the reputational damage the company has suffered recently.

Shares in Iberia and British Airways owner IAG (IAG) also rose 2% to 605p as Monarch was a direct competitor to the company’s airlines in European short-haul destinations.

Tui Travel (TUI), which competed with Monarch in charter holidays, saw its shares rise 1.5%. 

Monarch’s Twitter feed carried this brief message to followers this morning: “Monarch customers in the UK: don’t go to the airport. There will be no more Monarch flights. This page will no longer be monitored.” According to the Civil Aviation Authority, 110,000 customers will need to be brought home after the airline collapsed into administration overnight.

Monarch was not a listed company as it was sold to investment firm Greybull Capital in 2014. The airline has been particularly affected by the slump in the pound after the Brexit vote and terrorism concerns in Europe and North Africa. Monarch’s chief executive said that the collapse in flight sales to Egypt and Tunisia were a key factor in the airline’s demise.

In August, German carrier Air Berlin filed for insolvency after majority shareholder Etihad pulled the plug on further funding. Lufthansa and easyJet have already put in bids for Air Berlin’s assets, which include 140 planes and landing strips in Germany.

 

 

 

 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
easyJet PLC1,294.50 GBX-0.77
International Consolidated Airlines Group SA542.20 GBX0.48
Ryanair Holdings PLC13.64 EUR-0.80

About Author

James Gard  is content editor for Morningstar.co.uk

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites