Shorting soars in legacy airlines
25 September 2015 London
Image: Shutterstock
Legacy airlines in Europe are seeing an increase in short selling as they face competition domestically, from budget airlines, and internationally from long-distance start-ups and well-known players.
According to data from Markit, these legacy airlines have seen short sellers doubling their positions. Air France is the most shorted, with 10.3 percent of all shares out on loan, while budget airlines now have about half the short interest that they did 12 months ago.
The Markit report suggested that legacy airlines have not seen the benefit of a drop in oil prices, or the improvement in the European economy, as customer have moved towards low-cost competitors within Europe, while sticking to large and well-capitalised foreign competitors for long-haul travel.
They have also had problems with staff striking, as managers have tried to make cost-cutting changes in order to remain competitive.
Shares of the nine listed legacy carriers have dipped 20 percent below those of their ‘budget’ competitors. This is the opposite of the trend seen 18 months ago, when legacy airlines saw less shorting than their peers.
Short interest on legacy airlines currently stands at 3.5 percent of shares outstanding, a 60 percent increase on the start of the year. These firms are now more shorted than both the European stock market and the airline field in general, which has an average of 2.8 percent of shares shorted on average.
According to data from Markit, these legacy airlines have seen short sellers doubling their positions. Air France is the most shorted, with 10.3 percent of all shares out on loan, while budget airlines now have about half the short interest that they did 12 months ago.
The Markit report suggested that legacy airlines have not seen the benefit of a drop in oil prices, or the improvement in the European economy, as customer have moved towards low-cost competitors within Europe, while sticking to large and well-capitalised foreign competitors for long-haul travel.
They have also had problems with staff striking, as managers have tried to make cost-cutting changes in order to remain competitive.
Shares of the nine listed legacy carriers have dipped 20 percent below those of their ‘budget’ competitors. This is the opposite of the trend seen 18 months ago, when legacy airlines saw less shorting than their peers.
Short interest on legacy airlines currently stands at 3.5 percent of shares outstanding, a 60 percent increase on the start of the year. These firms are now more shorted than both the European stock market and the airline field in general, which has an average of 2.8 percent of shares shorted on average.
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