1:00 AM 11th November 2023
Market Analysis: Audi Car Subscriptions, UBS, Ryanair, B&M and Airbus
Audi car subscriptions: On-demand services will provide a consistent stream of income; Typical Audi buyers are different from tech-savvy Tesla's consumer. UBS: The bank is taking great strides forward in its integration of Credit Suisse; Longer term it’s critical to grow flows in the US with increased scale. Ryanair: Summer passenger traffic numbers are back to or above 2019levels; City breaks have been slower to recover; Wage inflation and staff shortages are anticipated to remain headwinds. B&M: One of the main beneficiaries of Wilko's collapse; Margins arechallenging due to more food sales and labour inflation. Airbus: Improvement in October's deliveries but remain slow relativeto pre-Covid level; The recent Geared Turbofan issues raise investors'concern on Airbus's delivery trajectory
Interviewing executives in the automotive space, Orwa Mohamad Analyst at Third Bridge made a series of remarks regarding Audi introducing subscription service,
informed by insights from industry experts:
"Legacy OEMs such as Audi continue to follow in the footsteps of Tesla by introducing on-demand services. On-demand services will provide a consistent stream of income which can be an important profitmaker.
"However, it remains to be seen whether the typical Audi or BMW customer is willing to pay for such services. While digital native brands like Tesla attract a tech-savvy consumer, the typical 50-year-old Audi buyer is used to pay at the cash counter, get the car and drive it, period."
In the financial space, Max Georgiou, Analyst at Third Bridge made a series of remarks regarding UBS.
"Even though UBS posted a quarterly loss, the bank is taking great strides forward in its integration of Credit Suisse. To be able to recommit to ambitious targets laid out earlier this year has inspired confidence.
"Wealth and Asset management will be a key battleground going forward, UBS stabilised flows from CS, and now longer term it’s critical for the pro-forma bank to be able to grow flows in the US with their increased scale. Our experts highlight that European banks have struggled with scale here previously. UBS now has that opportunity."
For the airline space, Olly Anibaba, Analyst at Third Bridge comments on Ryanair:
“Overall, summer passenger traffic numbers are back to or above 2019 levels. Ryanair is now 123% above FY19 levels, and key leisure travel destinations include the Greek islands and Southern Europe.”
“City breaks have been slower to recover as customers prioritise leisure travel. Our experts believe passenger demand is inelastic during peak summer travel.”
“Regarding fleet flexibility, Ryanair can move capacity to where there is greater demand or increased deals with airports, this is pivotal for net income stability. Wage inflation and staff shortages are anticipated to remain headwinds for Ryanair in the coming 12 months.”
Orwa Mohamad, Analyst at Third Bridge also takes look at the retail space and B&M:
“B&M is one of the main beneficiaries of Wilko's collapse. Our experts say there is a significant overlap between their geographical footprints and product offerings.
"B&M uses its food offering to drive footfall, even though it yields lower margins than non-food items.
Operating margins are front of mind for all value retailers right now. Our experts say labour inflation is a persistent issue, especially now the UK government has implemented new minimum wage requirements.
"Our experts say Poundland has seen a decline in customer confidence after deviating from its one-pound price point. B&M has spotted the gap in the market for affordable home and garden products sold in out-of-town megastores - something Poundland may find difficult to emulate.”
Louis Knight, Analyst at Third Bridge concludes with remarks regarding Airbus.
“With order books packed out for almost the next 10 years, the aircraft construction market is very much a supply-limited market. Although Airbus is slowly turning its supply chain around this situation is still dogging deliveries which remain slow relative to pre-pandemic times.
“This year's September delivery rate was roughly 20% lower than pre-pandemic levels so the aerospace giant will be pleased to see an improvement in October. Airbus says it has 60-65 critical suppliers and 10 are causing issues - particularly in the US. Our experts say an extra 100 deliveries in 2024 will be a huge challenge.
“Investors are very concerned about Airbus’ delivery trajectory because of the recent Geared Turbofan issues Pratt and Whitney are having. This has caused around 1,000 engines to need to be inspected over the next few years. This begs the question: will Pratt prioritise spare engine deliveries over the new ones promised to Airbus?”
Third Bridge is a global primary research firm that interviews more than 6,000 internationally recognised industry experts and business leaders a year to compile 360-degree market intelligence for institutional investors. www.thirdbridge.com