As travel slowly returns, airline share prices have bounced around, with optimism and Covid-19 case rates swapping focus each week. The most recent dip came as Germany, the Netherlands and Austria raised the alarm over rising Covid cases, with lockdowns of varying degrees put in place in each of those countries.
This worsened outlook and the greater prospect of the pandemic determining another winter’s travel options hit airlines hard, with the majors like British Airways-owner IAG down about 10 per cent since the first week of November.
Aim-listed Jet2 has a slightly different focus to the other London-listed carriers bar Tui, given the lion’s share of its business comes from package holiday sales. As of November 18, its outlook for the coming months was positive, with seat capacity only down 11 per cent compared with the 2019/2020 winter period. This update also included a widened interim operating loss, as customer demand did not meet expectations. The airline’s load factor, effectively how many seats are filled, fell from 69 per cent in the first half of last year to 57 per cent this year because restrictions kept more wary travellers on the ground.
After this half-year results announcement, executive chair Philip Meeson sold £22m in shares, as well as another £5m from an entity called The Philip Meeson 2019 Settlement, of which he is a trustee, but not a beneficiary. The company said the sale was consistent with his “historic sales of small amounts of his holding from time to time”. Meeson, who bought what turned into Jet2 in 1983, still owns 20.18 per cent of the company.
Like Ryanair, Jet2 has used the forecast demand in travel for 2022 to pitch itself as a Covid-19 recovery story. While it’s hard to imagine 2020-level restrictions coming back, the past week has shown it’s not completely off the table.
Saga chair splashes the cash
Shareholders who regularly grumble about directors not putting their money where their mouth is can find little fault in the actions of Sir Roger de Haan. The Saga chair has forked out the best part of £1m in share purchases after buying 341,415 shares at an average of 293p a piece in one of the more noticeable directors’ deals of the week.
With the share price currently near multiyear lows, Sir Roger’s timing looks like a relatively shrewd bet given that a combination of greater regulatory clarity, deleveraging over the next few years and a return to some sort of economic normality is likely to float Saga’s share price higher than one of its cruise ships.
The regulatory clarity follows the phasing out of so-called “price walking”, where premiums for customers who auto-renew their insurance, or at least fail to change providers, are automatically charged progressively higher rates. While the industry was understandably less than enthusiastic at first, the certainty that pricing models, and in some cases whole businesses, had to change to reflect the demands of a new regime has offered insurers considerable operational clarity.
It is fair to say that Saga has not had the easiest time over the past 18 months, with the pandemic leading to the sight of cruise ships rusting away in sheltered coves around the coastline.
While far from a happy situation, at least the retiree-focused company had other business units that were able to take up some of the strain from its suffering holidays division, particularly its broadly successful insurance arm. In pure valuation terms, Saga is reasonably priced for an insurer with a share price barely 0.6 of net asset value — well below the three average of 1.1 times NAV — so it lands well within bargain basement/value trap territory.