Share Prices & Company Research


21 March 2022

Market Round Up

Since Russia invaded Ukraine last month, inflationary pressures have surged with sanctions on Russian exports leading to monumental fuel price movements. An increasing number of industries are having to bear the brunt of this, with air travel being the most recent. Delta Chief Executive Ed Bastian has said that airlines have no choice but to pass fuel price hikes on to customers as they add a fuel surcharge to international flights. Despite jet fuel prices partially falling after they skyrocketed last month, they remain roughly two-thirds higher than this time last year.

In spite of this, at an industry conference this week, the Delta President Glen Hauenstein said the company is confident that passengers will be willing to pay the prices that the airline needs to charge to cover rising fuel costs. This would mean recapturing between US$15 and US$20 on an average ticket value of US$200. Even with the week following the invasion seeing bookings for transatlantic flights fall between 5% and 10%, Delta had its biggest ever day of sales last week as customers are excited to travel again as COVID-19 restrictions lift. Bastian has said that he sees no sign that the conflict will have a significant impact on demand from US consumers, but the airline will continue to take a cautious approach with regard to oil prices and consumer demand over the summer. 

Other firms such as United Airlines and American Airlines are planning to cut their 2022 seat capacity, partly due to rising fuel prices, but they do not deny that their revenue has improved due to stronger travel demand. According to analysis of online sales from six of the top 10 US airlines by the Adobe Digital Economy Index, travellers spent more on domestic flights in February this year than in the same month of 2019 with estimated sales of US$6.6bn. Although business travel has reached just 60% of normal levels, Delta is optimistic that it will continue to push upwards and expects premium leisure travellers to make up for the shortfall.

HSBC has announced that it will close 69 more of its UK branches, on top of the 82 that it closed last year, as the pandemic has swiftly advanced the shift to digital banking. This further reflects a wider industry move away from costly high street locations as other banks are offering more cost-effective online services. Since 2017, HSBC has experienced a 50% average decline in footfall with fewer than half of its customers using its branch network. To ensure customers are not disadvantaged by this decision, HSBC plans to “reshape” its remaining network by providing free tablets and provide training to vulnerable customers in areas where branches are closing. For communities that remain reliant on cash, the firm will provide standalone self-service cash machines.

It is not only HSBC that is closing its traditional counter service in favour of online banking, with a series of financial institutions announcing branch closures throughout the pandemic. In November 2021, TSB announced that it would be closing a further 70 branches as 90% of transactions took place on digital channels last year, while Metro Bank proposed its first closures in February’s annual results. Last October, Lloyds Banking Group also said it would be closing another 48 branches and Virgin Money announced it would be permanently shutting 31 outlets the previous month. This has unsurprisingly sparked concern for rural communities, vulnerable groups and the elderly who are more dependent on bank branches and fear that they will be forced to travel significant distances to access branch services. That said, HSBC has said that all of the branches that were closing had a post office within 1.5 miles and 90% had ten or more free-to-use ATMs within one mile, with other banks having similar measures in place. Several lenders including HSBC are supporting an initiative to maintain access to cash via shared hubs with a rota of community bankers from participating institutions, with five hubs due to open this year.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get back less than you invested.
Market Round Up
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