DAVY VIEW

In our January 14th report, “The Sun Also Rises”, we argued that the aviation industry may have lost nearly half a decade of growth (almost a ‘lost generation’) during the pandemic, but we believe we are in the middle of an upcycle. We are in a golden period. We think that industry supply issues have troughed but will only slowly improve. The Original Equipment Manufacturer (OEM) deliveries are increasing, but engine issues continue to constrain the market. Has the situation in the Middle East upended this? We attach our latest industry presentation here. We outline the issues in the Gulf, stock exposures and sensitivities. If the ‘COVID generation’, consumer demand and US airlines are proven correct that earnings are relatively resilient, the prize will be a re-rating of the very low multiples (below pre-COVID) on which the airlines trade. As ever, the summer season will be key. We will further explore these themes at our 18th London Transport conference, which will take place on June 25th at the Davy office in Gresham St. Paul’s, London.