p16 pink sep26 24/9/08 17:33 Page 16
news city & finance
ttglive.com
Comment Sadly for those that are made unemployed,
they take the brunt for the rest of us.
Brace yourself for
So 2009 looks pretty gloomy? I think for Joe
Public it is, but it is during the tough times that
firms can prepare for the upturn and come out
stronger, and in the City that is what we are
looking for.
the real recession
Buy or sell?
British Airways is a perfect example of that and
will come out of this downturn stronger and so,
despite the fact that every time I fly with them
they seem to find something to go wrong, we
would buy the shares at today’s level (220p).
The pain being felt in the City is about to spread, and will The deals it is doing with Iberia and possibly
have a devastating impact on the travel industry as it hits
American Airlines are the right way to go, it has
the spending habits of UK consumers. By Andrew Monk
a much improved balance sheet and although
profits will be hit short term, it is a world-class
airline with a valuable position at Heathrow.
T
he travel industry thought the world Stormy outlook The no-frills airlines, Ryanair and easyJet, will
was coming to an end when XL Leisure In 2009, borrowing will continue to be hard and survive but it will be harder as they are more
Group collapsed and passengers were more expensive, unemployment will increase, focused on the leisure customer and also on dis-
stranded. house prices will continue to weaken, taxes will cretionary spending. EasyJet has done remark-
It felt bad, but actually a much larger volcano have to rise and investments will not give any ably well and is a good business but we don’t
was erupting in the City, which will have far comfort either as stock markets struggle to go believe it will get stronger during the downturn.
greater consequences for the travel industry. forward. Its customer base will get weaker and the
In just one week, the entire US investment The pain that is being felt has so far really only growth of second homes in Europe will reverse,
banking industry vanished and the British affected the City and the stock market – it has so we would avoid easyJet shares for now (365p).
banking system was pushed to near collapse. yet to reach the wider UK economy. The big two tour operators are fascinating and
This will have knock-on effects throughout the People are talking about it, but it’s only when in the City there are contrasting opinions.
UK economy and all companies exposed to the you are actually made unemployed that it really On the one hand they send out a positive
consumer, and that includes the travel industry. hits home. message about their future profits, are confident
We all knew as far back as when Northern One of the problems with unemployment that cost savings and capacity cuts will help them
Rock collapsed that the days of cheap finance is that you are rarely made slightly unemployed: grow and that the consumer will never cut his
were over, although the reality is only just it tends to be you either have a job and a salary, holidays.
starting to dawn on many people. or you don’t. On the other hand we are yet to feel the real
consumer crunch and it is only when you are
.
com
unemployed that you really do have no choice
view
but to miss a holiday.
Britainon
The collapse of XL sent the big two’s shares
soaring as investors factored in less capacity,
but in reality capacity for 2009 will not really be
dramatically reduced and the no-frills carriers
may well, in order to protect their profits,
switch utilisation next summer from unprofitable
scheduled flights to profitable charter.
Shares in the big two could go either way. Both
Tui Travel (225p) and Thomas Cook (250p) are
well-run businesses and if they do manage to
keep their head above water in 2009 will emerge
very strong, but I don’t believe we really
appreciate yet just how bad 2009 will be for
the consumer.
So for these shares it is neither a buy nor a
sell, but watch for further developments before
making up your mind, as the next six to nine
months will be critical.
Andrew Monk is chief executive of Blue Oar
The effect of the banking crisis in the City is expected to filter down to the wider UK economy next year, hitting more travel firms Securities
16 26.09.2008
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104