“The maths are similarly exciting for IAG, owner of British Airways, Iberia, Vueling and now Aer Lingus,” Davies continued. “The company’s latest guidance at its Q2 results in July was for a total fuel bill of €6.0bn for 2015. Given commodity and currency movements since then, my own calculations suggest that the figure for 2016 could be as much as €1bn lower.”
Davies also sees a possible knock on effect to companies which draw revenues from air travel, such as retailers with a heavy presence in airports.
“If some of these fuel savings are passed on to consumers in the form of lower prices, we should expect passenger numbers to go up,” Davies noted. “WH Smith might not seem the most obvious beneficiary of this, but the reality is that its travel business now accounts for nearly 60% of group trading profit and its airport shops are a very substantial part of this.”
The ‘very rapid growth in Chinese tourism’, both domestic and international, is also creating investment opportunities.
“Merlin Entertainments is one company that should be well placed to benefit from this trend,” Davies said. “It already operates a wide range of attractions such as Madame Tussauds in the UK, Europe, Australia and North America that could see increases in visitor numbers from China. I also see a huge opportunity for the company to develop Legoland theme parks across Asia over the next decade.”
“The four companies I have referred to here now account for just over 13% of the Jupiter UK Growth Fund and that number has been rising in recent months,” Davies said. There are also one or two other companies that are in my view well placed to benefit from this new golden age of travel that I am currently researching and may be added to the fund in the future.”