HSBC has upgraded both Ryanair Holdings PLC (LON:RYA) and British Airways owner International Consolidated Airlines Group (LON:IAG) to ‘buy’ from ‘hold’ in the wake of the UK’s election result, saying the new Conservative majority will provide “more clarity” for airlines in the short-term.
In a note on Friday, the bank said it the pound (GBP) to strengthen and for “consumer and business confidence to improve as uncertainty abates”, after which attention would turn to the details of a post-Brexit trade deal with the EU.
“Strengthening GBP, and consumer and business confidence should boost UK-sold revenues. GBP strength may depress inbound tourism, yet a less tense political environment in the context of Brexit might conversely support both inbound tourism and visiting friends and relations traffic”, analysts said.
Target prices for Ryanair and IAG were also upped to €16 from €12.25 and to 750p from 550p respectively, while HSBC added that it also expected trading prospects to brighten for fellow carrier easyJet PLC (LON:EZJ).
The market seemed to concur with the assessment as shares in Ryanair jumped 3.2% to 14.4p in mid-afternoon trading, while IAG surged 12% to 623.4p. easyJet also mounted a strong ascent. Rising 7.2% to 1,460p.