Short Selling

Short Selling Report: Air France-KLM (AF:FP)

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Air France-KLM
(AF:FP)
12 months:
+37%
Activity:
Bearish
Pattern:
Rising short interest
News:
Poor H1 results
Air France-KLM
(AF:FP)
12 months:
+37%
Activity:
Bearish
Pattern:
Rising short interest
News:
Poor H1 results

Short selling data can help active investors avoid losses. Short sellers tend to be knowledgeable, high-conviction traders. If they’re shorting a stock, there’s usually a good reason they are doing so.

In this report, we are going to discuss the short selling data on Air France-KLM (AF:FP). Air France-KLM is a Franco-Dutch airline holding company that is headquartered in Paris. The group, which specializes in passenger transport, cargo transport, and aeronautical maintenance, carries the most international traffic departing from Europe. It is listed on the Euronext Paris stock exchange and currently has a market capitalization of €2.5 billion.

Air France-KLM: Short Selling Activity

Our short selling data shows that short interest here has risen substantially recently.

At the start of September, four institutions had disclosed short positions in AF stock. Those short were Point72, Helikon Investments, Marshall Wace, and Sandbar Asset Management. In total, 37.02 million shares worth €147.73 million were being shorted by these four managers. This represented short interest of 5.76%.

Today, however, 42.99 million shares worth €169.38 million are being shorted. This represents short interest of 6.69%. Joining the four managers listed above on the short side is Kite Lake Capital Management, which has taken a small short position of 0.53%. The institution with the largest short position is Helikon Investments, which has a short position of 2.90%.

We see this 16% increase in short interest as a red flag. Research shows that sharp increases in short interest often precede a period of underperformance.

 The table below illustrates some of the columns that provide short-selling statistics.

Covid-19 Uncertainty

Air France-KLM’s recent H1 results were poor, which is not surprising, given that airlines have been hit hard by Covid-19.

For the period, total revenue amounted to €4,910 million, down 20.8% year on year. Meanwhile, net income came in at -€2,970 million, which was an improvement on the figure posted a year earlier (-€4,413 million), but still poor. The number of passengers carried during the period was 11,847 million, which was down 38.7% year on year.

Looking ahead, the outlook appears to be improving now that travel restrictions are being eased. The company noted that the reopening of the North Atlantic for American citizens to visit Europe had resulted in improved booking trends.

However, the company may not be completely out of the woods yet. With Covid-19 cases rising in France, Germany and the UK, passenger traffic into and out of Europe is likely to remain well below 2019 levels in the near term. Add in the fact that business travel is likely to remain subdued for a while, and the near-term future looks quite uncertain.

It’s worth noting that analysts at Berenberg have a ‘sell’ rating on the stock with a price target of €3.50.

In light of the uncertainty here, we see the increase in short interest as a bearish indicator. It tells us that institutions expect the stock to fall from here.

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