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This has been a volatile year investing in the Airline sector, but short sellers have been predominately profitable trading stocks in this sector. With the recent announcements of successful Covid-19 vaccines, the return of the airline traveler is expected sooner rather than later, and we are seeing overall short interest in the sector declining. Short interest in the sector peaked in early June and has dropped by -24% since then.
Total short interest in the Airline Sector is $9.59 billion and we have seen -$386 million of short covering over the last thirty days, a decrease of -4%. The most shorted stocks in the sector are dominated by U.S. airlines with American Airlines (AAL) the largest short in the sector by a wide margin, making up 21% of short interest in the sector. Deutsche Lufthansa (LHA GR) saw the largest decrease in shares shorted over the last thirty days, a decline of -$193 million or -23%, while Intl Consolidated Airlines (IAG LN) saws the largest increase in shares shorted over the last thirty days, an increase of +$122 million or +243%.
We can look at the largest shorts in the Airline Sector by region. The following are the top ten most shorted stocks in each region with at least $10 million of total short interest.
In the U.S./Canada region over the last thirty days the largest there were no stocks with large increases in short selling although American Airlines (AAL) was the only stock with over $500 million of short interest to see continued short selling with $12 million of new shares shorted. Southwest Airlines (LUV) and United Airlines (UAL) had the largest amount of short covering in the region.
In Europe, short sellers in Deutsche Lufthansa (LHA GR) and Air France-KLM (AF FP) were trimming their positions recently with UK and Spanish listed Intl Consolidated Airline (IAG LN & IAG SM) seeing almost 4130 million of increased short selling over the last thirty days.
There are only two airline stocks in Japan with short interest over $1 million and both saw increased short selling over the last thirty days. ANA Holdings (9202 JP) continues to be the favorite short in the region.
There are only three airlines (along with their U.S. listings) in the South American/Mexican/African/Middle East region with short interest over $10 million. Short selling and covering activity was minimal in these stocks over the last thirty days Bur Copa Holdings (CPA US) and Azul SA (AZUL US & AZUL4 BZ) continued to be the most shorted airline stocks in the region.
Qantas Airways (QAN AU) continues to be the only airline stock in the Asia Pacific ex Japan/Hong Kong and China region with short interest over $100 million.
Short Interest in Hong Kong/China airline stocks region has remained relatively steady during the Covid pandemic but recently we have seen short covering in the four most shorted stocks in the sector with 16% of short covering over the last thirty days.
Overall, short selling airline stocks in 2020 was a profitable trade with 75% of every dollar shorted and nearly two-thirds of all the stocks in the sector producing positive returns. There were 42 airline stocks that were losers for shorts, generating -$368 million of year-to-date net-of-financing mark-to-market losses (a -16% return) while there were 71 airline stocks that were winners on the short side, generating +$4.22 billion of year-to-date net-of-financing mark-to-market profits (a +63% return).
The top worldwide most profitable airline shorts in 2020 are:
The top worldwide least profitable airline shorts in 2020 are:
November saw a decided reversal of fortune for airline short sellers with only nine profitable shorted stocks in the month, led by SAS AB (SASNOK NO) at +$1.3 million on month-to-date net-of-financing mark-to-market profits. In total, airline short sellers were down -$1.85 billion in month-to-date net-of-financing mark-to-market losses, for a -20% loss in less than a month.
The worst performing airline shorts for the month of November are:
With mark-to-market losses taking a large chunk out of their year-to-date mark-to-market profits we should be seeing short covering in these names as traders rush to realize unrealized profits before they disappear like airplane contrails into the sky. This short covering should bolster airline stock prices and create even more buy-to-cover pressure.
Eight out of the top-ten least profitable airline shorts for November had net short covering over the last month. Only American Airlines (AAL US) and ANA Holdings (9202 JP) had net short selling while losing money in November, if their stock prices continue to rise we should expect this sector wide short squeeze to affect them as well and traders to start buying to cover into the rally.
If we continue to see positive Covid vaccine news and a decline in lockdown talks airline stocks should continue their upward trend and the airline short squeeze should get tighter and tighter. Especially in the European and Japanese regions where total short interest is up significantly from their January levels.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up to date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.