Falling oil prices, strong consumer demand and the opening up of long-haul destinations are boosting the share prices of airlines and other players in the travel sector.
The optimism comes despite concerns about the cost of living amid increasing air fares and rising package holiday prices.
The Financial Times noted on Wednesday: “Airline shares have had a strong start to the year amid signs of resilient bookings, but the major European players including easyJet and British Airways owner IAG are still trading at a discount to their levels before the pandemic.”
It said no major airline has reported a significant slowdown in demand for flying “despite the grim economic backdrop”.
Ryanair has reported record sales this January, with group chief executive Michael O’Leary pointing to “very strong demand” and “no sign of a recession impact yet”.
The FT noted Ryanair shares were on Tuesday trading at €14.70, their highest since May but below the €18 level of early 2020.
The Proactive Investors website reported: “Share prices in the airline sector have raced away in the first few weeks of 2023 on hopes of a return to pre-pandemic levels of travel.”
Shares Magazine said the FTSE 100 index is “up approximately 4% year-to-date to trade within sights of its all-time high from May 2018”, commenting on how travel and retail stand out as performing particularly well.
“Pent-up demand for overseas holidays remains a strong driver for airlines and the wider travel industry,” it said, noting that the Advantage Travel Partnership last week reported a 75% rise in sales since the start of the year over the same period in 2022.
It said the early momentum will depend on the rate of inflation and the resilience of consumers.
The Fidelity International website reported another factor will be the cost of fuel and how airlines have hedged.
It added: “Analysts at UBS have forecast that easyJet’s shares could soar by 55% on the back of anticipated bumper demand over the Christmas period just gone. All eyes will be on easyJet’s Q1 trading update, due out on Wednesday (January 25) next week to see whether that sales bump happened over the festive period and for signals that 2023 could be the year easyJet’s sales take off.
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