Four growth stocks to look at in the current scenario

The coronavirus epidemic has driven the world's airlines industry towards financial crisis - and this is going to hinder attempts to curb greenhouse gas emissions from airlines, which has been rising steadily over the past few years. While airlines have seen a dramatic decline in air travel with movement getting stopped altogether, but pollution, demand is likely to surface again as the world resumes its flying schedule. Nonetheless, the airline industry, an increasingly key contributor to global warming and the emissions of carbon dioxide, cites the financial hardship driven by the covid-19 pandemic as a reason for evading long-term efforts of various organisations and multi-nation associations to combat global warming.

Support planned for the aviation industry in the United Kingdom

First lets understand that the deeply ravaged industry is in dire need of financial support, by now it has become crystal clear that the coronavirus pandemic has had a major impact on all economic activities across the world, led by the travel and tourism and especially the airline industry. There’s been a complete lockdown of domestic air travel in most part of the world, to stop the community spreading of the disease within the country, while international passenger and cargo air travel has also been severely hit.

Though despite this grim situation, the Chancellor of the United Kingdom has warned the aviation industry that it will only provide "bespoke funding" from the government after all other choices have been exhausted as it reels through the virtual disruption of global travel due to the coronavirus.

Nonetheless, Rishi Sunak's letter, sent in the middle of March, also discussed the likelihood of government interference for cash-strapped business firms that can prove they have exhausted all other survival avenues. His letter indicated that, due to the significant status of the airline industry to both the economy and economic expansion, the administration would have to enter into discussions with specific companies seeking aid as a last resort, having exhausted all other options.

Various Ministers of the Boris Johnson administration did not rule out the possibility of taking equity stakes in certain airlines to avoid the failure of companies, which are otherwise considered to be viable. Some reports also surfaced, quoting that airlines seeking government funding would expect ministers to claim an equity interest at commercial rates and shareholder dilution will be significant.

Mr Sunak, in an announcement to the support for all industries, had previously also unveiled a £ 330 billion loan guarantee package that would allow banks to lend to businesses in a flexible way. The government expects that such loans will not be open to all the airlines because applicants must have an investment-grade credit rating for all of its previously issued securities by a recognised credit rating agency. Mr Sunak said that reassessing their cash-flow roles should be the focus for all businesses. He mentioned that the government expects the companies to take all necessary steps to conserve cash and optimise liquidity, including cooperation with shareholders, lenders and markets and the use of all available resources and infrastructure.

Should the financial support to the industry come with climatic caveats?

A coalition of 26 civil society organisations in the United Kingdom has written to the Chancellor, Rishi Sunak, requesting strict conditions for any rescue for the industry, including strict greenhouse gas goals in line with the Paris Agreement and assistance initiatives. In their letter, they stated to the Chancellor that public resources, as well as economic needs, must be used to meet social and environmental goals as well.

Campaigners and experts have raised their optimism that the airline sector might bounce back with the help of public money after the Covid-19 outbreak and will once again start pushing in carbon emissions at elevated levels.

The campaigners - including the likes of environmental organisations such as Greenpeace, Flight Free, the thinktanks of the IPPR and New Economics Foundation, and Tax Justice - in their letter to the Chancellor called on the government to take equity stakes in airlines instead of handing out cash or loans. They want social benefits combined with workers 'rights, including minimum wages as well as no mass redundancies, to become pre-requisite conditions as a part of any rescue package that the government offers to these companies. The activism organisations also advocated that in the longer term, they would want fair transitions for employees to move to other jobs in lower carbon-emitting industries.

They also want a new fiscal system that includes a frequent flyer levy or air-mile levy, replacing air passenger duties, which would reduce competition without eliminating access to flights from those with restricted means, by transferring the tax burden to frequent leisure flyers. Approximately half of the people in the UK do not fly in any given year, while a fifth of all flights is taken by 1 per cent.

The solutions that have been offered by the activists and the conditions they want the government to put forth in front of the airline companies of the UK as a part of the support package are expected to have a vital impact on the operations of these companies, even after the covid-19 tensions are over. This will also have a huge impact on the key airline players trading on the London Stock Exchange.

Following are the brief stock price performances of four major airline companies trading on the London Stock Exchange, highlighting how their share prices have responded to this news.

Easy Jet Plc

EasyJet Plc (LON:EZJ) is a European, low-cost airline operating company based out of Luton, United Kingdom.

EZJ Stock Price Performance

As on 3^rd April 2020, at 12:30 P.M Greenwich Mean Time, at the time of writing this report, the EasyJet Plc share was hovering at a price of GBX 489.10 on the London Stock Exchange market, a decline of approximately 1.63 per cent or GBX 8.10, in comparison with the price of the share on the previous trading day, which had been reported to be at GBX 497.20. As of the time of reporting, the market capitalisation of EasyJet Plc has been reported to be at a value of GBP 1.974 billion, with respect to the current trading price of the company’s share.

The company’s stock had given a Year to date negative return of 66.39 per cent, as at the time of the close of market on 2^nd April 2020.

Stobart Group Limited

Stobart Group Limited (LON:STOB) is an infrastructure support services company from Guernsey, that provides services to aviation and civil engineering segments in the UK.

STOB Stock Price Performance

As on 3^rd April 2020, at 12:35 P.M Greenwich Mean Time, at the time of writing this report, the Stobart Group Limited share was hovering at a price of GBX 45.80 on the London Stock Exchange market, a decline of approximately 0.43 per cent or GBX 0.20, in comparison with the price of the share on the previous trading day, which had been reported to be at GBX 46.00. As of the time of reporting, the market capitalisation of Stobart Group Limited has been reported to be at a value of GBP 172.34 million, with respect to the current trading price of the company’s share.

The company’s stock had given a Year to date negative return of 57.98 per cent, as at the time of the close of market on 2^nd April 2020.

International Consolidated Airlines Group SA

International Consolidated Airlines Group SA (LON:IAG) is a West Drayton based company, primarily engaged in the operations of airlines and other related services.

IAG Stock Price Performance

As on 3^rd April 2020, at 12:40 P.M Greenwich Mean Time, at the time of writing this report, the International Consolidated Airlines Group SA share was hovering at a price of GBX 200.50 on the London Stock Exchange market, an increase of approximately 0.25 per cent or GBX 0.50, in comparison with the price of the share on the previous trading day, which had been reported to be at GBX 200.00. As of the time of reporting, the market capitalisation of International Consolidated Airlines Group SA has been reported to be at a value of GBP 3.971 billion, with respect to the current trading price of the company’s share.

The company’s stock had given a Year to date negative return of 67.64 per cent, as at the time of the close of market on 2^nd April 2020.

Wizz Air Holdings Plc

Wizz Air Holdings Plc (LON:WIZZ) is a low-cost air transportation services providing company based out of Geneva in Switzerland.

WIZZ Stock Price Performance

As on 3^rd April 2020, at 12:45 P.M Greenwich Mean Time, at the time of writing this report, the BP Plc share was hovering at a price of GBX 2108.00 on the London Stock Exchange market, a decline of approximately 2.50 per cent or GBX 54.00, in comparison with the price of the share on the previous trading day, which had been reported to be at GBX 2162.00. As of the time of reporting, the market capitalisation of BP Plc has been reported to be at a value of GBP 1.846 billion, with respect to the current trading price of the company’s share.

The company’s stock had given a Year to date negative return of 46.44 per cent, as at the time of the close of market on 2^nd April 2020.

Comparative Stock Price YTD Return of EZJ, STOB, IAG and WIZZ

Source: Thomson Reuters, on 02-04-2020, after the closing of the London Stock Exchange Market