Hedge Funds Covering Airline Shorts

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Air-France KLM up as much as 50% up from February lows, short interest plunges.

Also see 2016 Hedge Fund Letters

Air-France KLM Shorts Retreat

As shown in Chart 1, short interest in Air-France KLM (AF) stayed between 6% and 10% of issued share capital from Jun’16 until Feb’17. This positioned AF among top most shorted in France and most shorted EU airline stocks.(*)

Chart 1: Development of Significant Short Interest in Air France KLMclost

Since 8th of February, AF stock has been on relentless rise and went up as much as 50%. A number of hedge funds has been short when the rise started: Marshall Wace, BlackRock Investment Management, AKO Capital, AHL Partners, All Options International and Exane Asset Management. Marshall Wace LLP has been holder of the largest AF short prior to the stock rise (3.1%) and has reduced it step-wise to 1.69%, as of latest disclosure. Similarly, all other hedge funds retreated partially or completely from their significant AF shorts. The overall significant short interest went from February high of 8.22% to only 3.61% as of latest disclosure.

Less Covering in Lufthansa

Another most shorted EU airlines stock, Lufthansa has also been on the rise since 8th of February and went up about 17%. As depicted in Chart 2, the short covering in Lufthansa has been less pronounced than in AF. This could, to a certain extent, be attributed to less violent Lufthansa’s move up. Interestingly, one of the largest short holders in Lufthansa is also Marshall Wace. Similar to their AF short, Marshall Wace also reduced their Lufthansa short by about 50%. i.e., from 2.12% on 8th of February to 1.08% as of latest disclosure.

Chart 2: Short Interest in Air France KLM down more than in Lufthansaclost

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(*) Data presented in this note is limited to significant short positions which at least equal 0.5% of company issued capital. Data presented in this note is as of March 8th, 2017.

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