Air France Whips Short-Sellers After Bookings Recovery, Macron

  • Quarterly stock gains are best among region’s major airlines
  • Short interest in Air France has fallen from a February peak

Short-sellers who circled Air France-KLM Group earlier this year found themselves in a fight-or-flight moment, and they’ve fled.

Europe’s largest airline has more than doubled in share price since the start of 2017, indicating the carrier has won the battle. Short interest has tapered to just 1.1 percent of shares outstanding on June 30 from this year’s peak of 13 percent in February, when it was among the most-shorted of European airlines, according data compiled by IHS Markit Ltd.

Shares in Air France-KLM, which in May reported increased bookings and higher business-class fares, leaped 76 percent in the quarter ended Friday, compared with 32 percent for EasyJet Plc., the next best performer among Europe’s main airlines.

“The revenue environment in 2017 appears to be brightening,” HSBC Holdings Plc analyst Andrew Lobbenberg wrote in a note on Monday, adding the stock to a list of the bank’s top French picks.

The airline should benefit from the improving economy and the planned reforms of French President Emmanuel Macron, HSBC said. Most of this year’s share gain has come since he won the first round of the presidential vote in April. The government owns 17.6 percent of the airline, data compiled by Bloomberg show.

Not everyone is convinced Air France is a winner. While the average estimate for the airline’s 2017 operating profit has risen by 11 percent in the past month, it’s still 16 percent below last year’s reported figure, according to data compiled by Bloomberg.

Sanford C. Bernstein analyst Daniel Roeska called the airline a laggard and sees potential for more labor unrest and says the airline’s short-haul business is “under attack” from EasyJet. The analyst initiated coverage on the stock with an underperform rating in a June 26 note.

HSBC’s Lobbenberg, who rates the shares a buy, acknowledged the airline’s challenges but suggested the bears have got it wrong, in a June 30 note. Air France-KLM is modestly valued, the stock has around 30 percent upside and selling the shares now “would be wrong,” he wrote.

— With assistance by Namitha Jagadeesh

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