Airline shares soar again

Shares of airline companies have been dropping recently due to the escalation  of Russian-Ukrainian tensions, cancellations of some flights and the uncertain global situation.

Shares of those companies have started to recover today after Russia's announcement that some units from the Ukrainian border have been withdrawn to bases as military drills ended. Shares of WizzAir (WIZZ.UK) are already trading a few percent higher on the day, the company also does not intend to reduce the number of flights in Ukraine.  The aviation sector is expecting a successful summer season and further easing of restrictions. 

Airline shares are particularly vulnerable to negative global news. In 2020, a sell-off was triggered by news on the coronavirus and the suspension of flights. This year, investors feared a repeat of this situation as a result of the Omicron variant and the current escalation of tensions between NATO and Russia. In the meantime, however, some European economies are successively lifting the Covid restrictions. WizzAir's CEO said in an interview that he expects more countries to join in, to which the aviation market may react euphorically.

The company is currently the largest airline, after RyanAir, operating flights between Ukraine and other European countries. WizzAir maintained all connections, but told passengers to carefully monitor the situation. The airline therefore did not lose out to Ukraine in real terms yet. In case the situation gets more tense, WizzAir can expect some Ukrainian people to  start considering evacuating from the country and thus  an increased number of bookings. The West is expecting a wave of emigration from Ukraine. Some Ukrainians do not want to wait and decide to fly out, taking their families with them. For carriers such as WizzAir, this is of course a chance for higher occupancy on board. This, however, would be only a short-lived boost and conflict will have a negative impact on the company's results over the longer term. Additionally, with the easing of restrictions and vaccines now widely available, airlines are gearing up for a potentially very successful summer season.

The rebound of the aviation sector is also visible in the case of companies such as Easy Jet (EZJ.UK), Lufthansa (LHA.DE), Rainbow (RBB.UK), AirFrance-KLM (AF.FR) or Norwegian Air Shuttle (NAS.NO).

Airline stocks are benefiting from de-escalation in Ukrainian tensions. Share price of Wizz Air Holdings (WIZZ.UK) has been trading in a range for most of 2021. Stock has recently bounce off the lower limit of the range at 41.50 and is moving towards the upper limit at 48.50, which is the first major resistance to watch. Source: xStation5