Airlines escape refund probe and Shell anticipates cash kicker from soaring prices

“Bargain hunters have emerged after Wednesday’s heavy selling, encouraged by strong trading in Asia overnight and apparent progress in the US on an extension to the debt ceiling,” says AJ Bell investment director Russ Mould.

“Some of the heat was taken out of the gas market after an intervention by Russian premier Vladimir Putin yesterday, cooling inflationary fears for the time being.

“However, even if energy prices fall from here, they’ve gone up so much in recent weeks that they will still have a large impact on inflation numbers in the coming months. So, while the FTSE 100 was making solid progress on Thursday morning, further volatility cannot be ruled out.

“Elsewhere, Pendragon became the latest car retailer to upgrade expectations, suggesting strong demand remains intact.

“How much longer the sector can continue to race ahead remains in question given the impact shortages of key components and supply chain issues are having on auto manufacturers.”

British Airways/Ryanair

“Airlines 1: passengers 0; this was not the outcome the nation wanted.

“British Airways and Ryanair have escaped what could have been a nasty and very lengthy battle over their refusal to give customers cash refunds for flights that people were unable or unwilling to take during the pandemic.

“It’s surprising for the Competition and Markets Authority to say the probe would have been too lengthy and costly due to the complexities involved. It’s effectively saying, ‘we’ll do our job but only if each task doesn’t take too long and isn’t expensive to carry out.’

“The airlines will welcome the decision as the last thing they wanted was a new barrage of refund requests and potentially a chunky fine.

“The industry is still in a fragile state financially as ongoing restrictions on travel continue to make it hard for them to operate efficiently and many consumers also can’t be bothered to book flights because of the ever-changing rules around testing.

“There are now a lot of people sitting on vouchers which have a deadline for use. That means people will now have to commit to a flight this year or next year or face the prospect of writing off the value of the voucher. The latter would be a shame as it might simply be easier to book something and then rearrange closer to the time if they aren’t ready to go on a plane for a while.”

Royal Dutch Shell

“Royal Dutch Shell has given shareholders a trailer of its third quarter results that will likely whet appetites for the main event later this month.

“Basically a wall of cash looks set to come the company’s way thanks to the recent surge in energy prices.

“Like other large energy companies, Shell has pursued a more streamlined approach, slashing costs and spending, and selling non-core assets in recent years as it looks to put its finances on a sustainable footing. This means when prices rise a lot of the increase drops through to profit and cash flow.

“Shell’s decision to pivot towards natural gas over the last decade has left it well positioned for the current market conditions. This most notably manifested itself in the blockbuster acquisition of BG Group which helped make it a leading player in the liquefied natural gas market.

“The unpredictability of renewables suggests there may be a role for gas as countries look to wean themselves off higher emitting fuels like oil and coal.

“It’s not all good news for the company, Hurricane Ida and the associated damage and disruption to its US operations will lead to a sizeable hit. Longer term Shell still faces the ticking clock of reaching net zero amid mounting shareholder and regulatory pressure.”

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