International Airlines Share News (IAG)

* European stocks fall amid fresh geopolitical worries
* Airlines sink, oil companies bounce after crude surge
* Investors fret about WTO ruling on Airbus subsidies
* Atlantia falls again after probe into road safety

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your
thoughts on market moves: josephine.mason.thomsonreuters.com@reuters.net

ROTATION PAUSED, DEFENSIVES IN DEMAND AMID SAUDI ATTACK (1027 GMT)
There's a bit of shuffle going on in Europe with value/momentum rotation taking a pause,
while investors take shelter in bond-proxy sectors such as utilities, healthcare and food &
beverage names amid worries about a possible oil crisis.
September's star performers, banks and autos, are deep in red this morning
as attacks on crude facilities in Saudi Arabia sent oil prices soraing, causing further worries
about global economic growth.




(Thyagaraju Adinarayan)
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SOARING OIL: THE LAST THING STRUGGLING AIRLINES NEED (0859 GMT)
Europe's airlines have had torrid a few years.
Higher fuel costs and stiffer low-cost competition have led to a wave of bankruptcies among
smaller European airlines in recent years, including Air Berlin, Germania, British-based
Monarch, Latvia's Primera Air and Swiss SkyWork.
The remaining players are still struggling with overcapacity, particularly in European short
haul and signs of weakness in corporate booking are now stirring worries about long-haul travel.
Now crude prices are rallying following the drone attacks that knocked a big portion of
Saudi Arabia's output out and triggered a rally in crude prices overnight.
Higher fuel prices are pretty much the last thing the sector needs.
Bernstein analysts Daniel Roseka and Alex Irving give a rundown on how airlines are hedged -
in summary, Norwegian Air Shuttle is the most exposed, while BA is the best positioned.

Here are their findings:

* British Airways owner IAG is best hedged, therefore least vulnerable to soaring
crude prices. At Q2 reporting, the company disclosed a hedge ratio of 95% for Q3, declining to
86%, 78%, 65%, 55% and 46% by Q4 2020.
"With relatively high margins, the company is the least sensitive to fuel prices in our
coverage. We estimate a 4% EPS sensitivity to fuel over 12m and 9% over 13-24m," they say.

* Lufthansa is quite reasonably positioned. At its Q2 reporting, Lufthansa
disclosed a hedging level of 79% for Q3 2019 and 78% for Q4. The company utilises a rolling
hedge strategy whereby it starts to put hedges on 24 months out, and gradually builds them up
over time, targeting 85% hedging 4 months before consumption.
The broker estimates a 10% EPS sensitivity to fuel over 12m and 17% over 13-24m.

* Air France has higher sensitivity. The company is less hedged this year than the
other legacy carriers, disclosing 62% hedging for Q3 and 60% hedging for Q4 at Q2 results. In
2020, the company was 48% hedged at last reporting. Lower net income margins also make the stock
more sensitive to movements in fuel prices.
Bernstein estimates a 21% EPS sensitivity to fuel over 12m and 24% over 13-24m.

* Among the low-cost carriers, Ryanair is significantly hedged over 12m, less so
thereafter. At its Q1 reporting (March year end), Ryanair disclosed 90% hedging for the
remainder of this fiscal year. This then declines rapidly for FY'21, which was 37% hedged. The
company targets 50% hedging 12-18 months out. We estimate a 4% EPS sensitivity to fuel over 12m
and 16% over 13-24m.

* Norwegian Air Shuttle is by far the most sensitive to fuel prices. From the
company's last release, it has hedged 138,500 tons of fuel for Q4 – about 27% of Q4'18
consumption, and with no subsequent hedges. With fuel prices rising, it has the most to lose. We
estimate an 84% EPS sensitivity to fuel over 12m and 95% over 13-24m.

Here's a chart showing how the airlines' shares have lagged the travel and leisure sector
this year:


(Josephine Mason)
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EUROPE'S WINNING STREAK GRINDS TO A HALT (0742 GMT)
The drone attacks at the weekend that knocked out a big portion of Saudi Arabia's oil output
has brought the stocks rally in Europe to an abrupt halt this morning. The pan European STOXX
600 is down 0.6%.
Not surprising, the oil & gas sector is the only one in positive territory, rising 2.6% and
hitting its highest since July 31 after the surge in crude prices and the airlines are getting
crushed by the prospect of soaring costs.
The news has reinvigorated the recently rangebound sector, which is on track for its best
day since early January.
Also getting crushed are luxury goods and drinks makers after reports Washington is
preparing to hit the sector with punitive tariffs after the World Trade Organization ruled in
its favour over Airbus subsidies in the first stage of a two-way dispute over aircraft
subsidies.
The widely expected decision is due to be unveiled in late September, people close to the
case have said.
Hermes International, Pernod Ricard and Gucci-owner Kering are all down 1-1.9%. Violent
protests in Hong Kong has also shaken investor confidence. Airbus is the top faller on
Paris' bourse, down 3.7%.
Atlantia is down 5.2%, sinking for a second day and hitting February lows, after police
investigating the deadly collapse of a bridge in Genoa last year said on Friday they had found
evidence that safety reports for some viaducts had been falsified, and placed under house arrest
three employees of firms owned by the company.
H&M shares are down 2.2% as investors lock in profits following
better-than-expected results.

(Josephine Mason)
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FUTURES UNDER PRESSURE (0658 GMT)
European stock futures are under pressure, as investors shun riskier assets after drone
attacks knocked out half of Saudi Arabia's oil output, renewing geopolitical tensions in the
region, while disappointing data from China has underscored worries about the slowdown in the
world's No. 2 economy.
The losses suggest the region will end its four-day winning streak at the open. The
Eurostoxx futures are down 0.7%, with DAX futures down 0.9%, while gains in
FTSE futures after the surge in crude prices helped lift its heavyweight oil sector have quickly
run out of steam and futures are down 0.4%.
Airlines from Lufthansa] to British Airways owner IAG are expected to
fall up to 5% after the big surge in oil prices. Airbus is seen falling 2% after a
report in Politico citing EU officials said that the United States has won the right to hit the
EU with billions of euros in punitive tariffs by winning a dispute over subsidies to the
aerospace giant.
In earnings news, H&M, the world's second-biggest fashion retailer, has delivered a
bigger-than-expected rise in third-quarter net sales and said summer collections had been
well-received.
One dealer says its shares, which hit their highest since December 2017, may fall as
investors book profits after the results, while another sees the stock getting a lift although
he notes that the beat was exclusively driven by FX tailwinds.
German lighting group Osram has advised its shareholders to accept the takeover
bid from AMS and sell their shares to the Austrian sensor specialist, saying
the offer was economically attractive.

Other headlines:
H&M's sales grow 8% in Q3 in local currencies
Lundbeck to buy migraine treatment developer Alder BioPharmaceuticals
Osram advises investors to sell their stock to AMS
Fresenius drops possible sale of blood transfusion unit - spokesman
Axel Springer plans layoffs after KKR becomes biggest shareholder - report
Wirecard says broadens strategic alliance with UnionPay
Advent takeover deal for Cobham backed by most shareholders -FT
FirstGroup pursuing potential options for separation of UK bus arm
Infrastructure fund consortium bids for stake in UK's nuclear power stations
After LSE's sharp rebuff, HKEX begins investor charm offensive
U.S and European regulators reviewing safety of heartburn drugs like Zantac
Siemens, Orascom sign deal to rebuild Iraq power plant

(Josephine Mason)
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EUROPE ON THE BACKFOOT (0533 GMT)
European stocks are expected to start the week on the backfoot as investors seek safety in
assets considered safe in times of geopolitical and economic strife after a drone attack on
Saudi Arabian oil facilities knocked out half the country's oil output and weaker-than-expected
Chinese data.
The strikes inflamed fears about Middle East tensions and worsening relations between Iran
and the United States, powering safe-haven assets, boosting gold.
Energy stocks are likely to get a boost from the soaring crude price overnight, which saw
Brent post its biggest intraday percentage gains since the Gulf War in 1991.
Data showed the slowdown in China's factory and consumer sectors deepened in August, with
industrial production growing at the weakest pace in 17-1/2 years, a sign of increasing weakness
in an economy lashed by trade headwinds and soft domestic demand.
"Slower production and sales data in China kept the worries of a weaker global demand on the
table, despite the short-term supply shortages in oil markets," says Ipek Ozkardeskaya, senior
market analyst at London Capital Group.
Still, the Chinese numbers underscored hopes of further stimulus from the government.
IG financial spreadbetters expect London's FTSE to open 30 points lower at 7,338,
Frankfurt's DAX to open 108 points lower at 12,360, and Paris' CAC to open 43 point lower at
5,613.

(Josephine Mason)
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(Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)