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Air France-KLM (NR, BB+, BBB-) {AIR FP Equity}

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  • Some headlines yesterday on French Air traffic controllers union planning strike - Air-France headlines today on follow up below. 1Q earnings next week, expected to be rough with EBIT loss of -€400m (x5) & looks like overhang impact from strikes into 2Q now.
  • Decompression we saw in airlines after Lufthansa miss has reversed a tad since - we remain sceptical on the sector continuing to see a pause on the recent run of positive rating action. Moody's on IAG likely next candidate but would still leave it crossover rated.
  • We keep screen cheap view in sector on the HY airport retailer Dufry over AFFP on the 28s given near term vol/headlines - two trade at par & roll down is similar for both.
  • Lufty 27's screen cheapest on shorter end (at Z+94) - the €900m line is wide of Dufry & crossover rated IAG. LCC & firmly IG rated EasyJet 28's at Z+81/3.9% may screen value given a healthy BS (net cash position) but we are tad cautious on low margins & low FCF - makes us reliant on BS holding shape with. high beta to equity pay-outs & capex bumps.

*AIR FRANCE SAYS ATC STRIKE CALLED FOR APRIL 25 (bbg)

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  • Some headlines yesterday on French Air traffic controllers union planning strike - Air-France headlines today on follow up below. 1Q earnings next week, expected to be rough with EBIT loss of -€400m (x5) & looks like overhang impact from strikes into 2Q now.
  • Decompression we saw in airlines after Lufthansa miss has reversed a tad since - we remain sceptical on the sector continuing to see a pause on the recent run of positive rating action. Moody's on IAG likely next candidate but would still leave it crossover rated.
  • We keep screen cheap view in sector on the HY airport retailer Dufry over AFFP on the 28s given near term vol/headlines - two trade at par & roll down is similar for both.
  • Lufty 27's screen cheapest on shorter end (at Z+94) - the €900m line is wide of Dufry & crossover rated IAG. LCC & firmly IG rated EasyJet 28's at Z+81/3.9% may screen value given a healthy BS (net cash position) but we are tad cautious on low margins & low FCF - makes us reliant on BS holding shape with. high beta to equity pay-outs & capex bumps.

*AIR FRANCE SAYS ATC STRIKE CALLED FOR APRIL 25 (bbg)

Keep reading...Show less