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Author: Alan LittleDate: 2020-10-07

Rare respite for aviation as Rolls-Royce (RR) and TUI (TUI) rally


The aviation sector caught a break on Tuesday as investors bought into some of the year’s most hard-hit companies, including Rolls-Royce (RR) (+20%) and TUI (TUI) (+8%).

Rolls-Royce (RR) and TUI (TUI) were among the large corporations in the aviation sector making significant gains on Tuesday as investors bought into many of the stocks that have struggled this year due to the COVID-19 pandemic.

Just several days after plummeting to a 16-year low, Rolls-Royce shares jumped 20.83% on the London Stock Exchange and closed at 149p.

The British engineering company announced plans last week to tap shareholders for £2bn in funding and secure a further £3bn from a government debt package after running into financial difficulties.

However, Rolls-Royce did rubber stamp a new deal on Monday to supply its engines for a major project in India and lifted the lid on a new £1bn convertible bond offering.

“Investors seem heartened that this could be the start of a long slow turnaround for Rolls-Royce, given the devastating impact the collapse in international travel had on its core aircraft engine manufacturing business,”

Hargreaves Lansdown analyst Susannah Streeter noted.

While analysts at The Motley Fool warned investors against buying into RR last Friday, it had softened its position by Tuesday, claiming that there may be an opportunity for “bold contrarians” to benefit with the right strategy.

A raft of other major companies in the aviation sector also got a boost on Tuesday.

TUI and easyJet (EZJ) have been hit by the steep drop-off in passenger traffic since March, but both made headway in trading.

TUI eventually closed 8% higher, while EZJ rallied 6%.

The FTSE 100 ended Tuesday 0.4% higher as oil giants BP (BP) and Dutch Shell (RDSA) both made modest gains.

However, Ocado Group (OCDO) struggled and eventually finished 5% lower.

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