The unloved aviation industry has been dead money for decades for many investors, but it now offers some compelling opportunities after widespread restructuring, Ardevora partner Gianluca Monaco has said.
Global airline franchises - and the companies which supply them with parts - all sold off sharply in the wake of the financial crisis and the subsequent recession.
However, many operators - particularly low-cost carriers including UK-listed easyJet, and US group Southwest Airlines - have bounced back after some dramatic cost-cutting, and Monaco said the sector continues to offer compelling opportunities.
Monaco said: “We prefer the point-to-point operators, those with low-cost structures. This by itself would not be enough though, had the industry not structurally improved over the last few years.
“Access to the debt market and raising capital was very constrained for these companies over recent years, both in the US and Europe. The only option for the airlines was to restructure and go into cost control mode and make the best of what was available.”
The group also backed manufacturing giant Boeing, adding it to the Global Equity fund a year ago in the wake of the Dreamliner battery scare. It has since returned 70%.
He said: “We could not see any structural problems with the company and felt investors completely overreacted to the concerns. We used this emotion to our advantage.”
