Rolls-Royce to benefit from China fights improvement, says Citigroup

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A pick up in flights in China is good news for makers of wide-bodied plane engines, according to Citigroup.


“Flights declined 33% in September (vs -41% in August) as the recovery was back on track as domestic China improved following a pullback in August and freight flights picked-up,” the bank said.


In wide-bodies, Rolls-Royce Holdings PLC has strong China exposure while rival Pratt & Whitney is strong in the freight market, though Citi believes when transatlantic flights resume next month (8 November) it should be General Electric (NYSE:GE) that does best.


Fares have also started tick up going into the final quarter of 2021, according to UBS,


After a mixed three months to September, prices in the current quarter have shown a strong improvement with average economy pricing up 16% (previous: circa 7%) and premium fares up circa 9% (previous: circa 5%).


The catch is that UBS says this largely reflects the surge in fuel prices, which are up 70% this year, though overall booking trends are improving even with the higher prices.


“We expect pricing commentary to be positive but not sufficient to offset the recent increase in fuel.


“Nevertheless, there is uncertainty around hedging levels which will alleviate margin pressure for certain airlines,” said UBS.

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