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Charting an Olympics dividend for airline shares

Andrew Hollins

14 Jun 2018

Charting an Olympics dividend for airline shares. Photography: Kevin Coombs
Photography: Kevin Coombs

In the run-up to the past three Winter Olympics, flag carrier airline shares in the host country have soared. The concluding part of our series uses charting from Thomson Reuters Eikon to highlight this Games premium.


  1. For the past three Winter Olympics, flag carrier airline shares in the host country  have recorded market-beating, double-digit gains in the event build up.
  2. The boost reflects the potential for air fare premiums of up to 40 percent and demand for last-minute travel bookings to unfilled events.
  3. Two out of the three flag carriers saw their share prices fall in the month after the Games.

The opening part of this two-part series on the stock market impact of the Winter Olympic Games on flag carrying airlines of bidding and host countries looked at movements connected to International Olympic Committee (IOC) bid announcements.

We now focus on the period immediately before and after the Games themselves.

For this, we will examine the stock price behavior of the flag carrier airline shares associated with Vancouver 2010 (Air Canada), Sochi 2014 (Aeroflot) and PyeongChang 2018 (Korean Air).

With charting available on Thomson Reuters Eikon, we analyze global stock market activity (Thomson Reuters Global Index, Dow Jones Transportation Average) and the airlines’ local stock markets.

Airline shares before the Games

Looking at the period prior to each of the Games, what stood out clearly were the double-digit price gains enjoyed by each of the host country airlines in the three months before the opening ceremonies.

Once again, these gains contrasted sharply with the comparatively benign activity witnessed on the global and respective local stock indices, as well as the global transport sector.

  • In the three-month period before the Vancouver Games, Air Canada stock rose by 16.5 percent while the global index and the transport index fell 4.2 percent and by just over half a percent respectively. During this period, the Toronto stock exchange rose by one percent.
  • In the three months before Sochi’s opening ceremony the global index was up just 0.58 percent, the transport index by 4.35 percent and the Moscow Stock Exchange retreated a little over two percent. This compares with a gain of more than 36 percent for Aeroflot.
  • A similar pattern occurs in the run up to the recent PyeongChang Games. Between 9 November, 2017 and the opening ceremony on 9 February, 2018, shares in Korean Air were up by almost 18.5 percent. This compares with a marginal half a percent gain on the global index, a 6.5 percent rise on the transport index and a 7.3 percent fall for the KOSPI stock exchange.

In all cases, the stock price gains enjoyed by the host country airlines were of a magnitude notably larger than activity in the wider market during the pre-Games periods.

Watch: Thomson Reuters Eikon: Give Me Insight

Airline shares after the Games

In contrast, the price activity post-games is less pronounced.

In the month following the Vancouver Games, Air Canada’s stock climbed more than 60 percent. This compares with gains of between 3.6 percent and 5.5 percent on the Toronto Exchange, the transport index and the global index.

In this instance, it should be noted that during this period Air Canada was at the start of a period of financial restructuring under new management.

In contrast, Aeroflot stock fell by more than 30 percent in the month following Sochi’s closing ceremony on 24 February, 2014. In the same period, the Moscow stock exchange fell by almost 13 percent, the global index by 1.1 percent, while the global transport index rose by 2.3 percent.

In the month immediately following the PyeongChang Olympics, which closed on 26 February this year, Korean Air shares fell just under eight percent.

During the same period, falls also occurred, although to a lesser degree, on the global index (3.9 percent), the transport index (3.7 percent) and the KOSPI exchange (0.84 percent).

The stock price changes of flag-carrying airlines for Olympic Winter Games

Games increase in air traffic

In the three months prior to their respective Games, each of the airlines in question enjoyed significant, double-digit stock price gains.

Echoing the findings from the first part of this series, these gains were also consistently of a magnitude in excess of any price activity seen in the comparison indices.

What might be driving this behavior?

Aside from the visibility and proximity of the Games in investors’ minds, there are other factors worth considering.

In addition to the increased inbound air traffic during the Games, the Winter Olympics represents an opportunity for significant price premia on airfares. Anecdotally, this can be between 15 and 40 percent.

Both the increased traffic and airfares have a positive impact on airline revenue.

Additionally, tickets for many ‘lesser’ Olympic events remain widely available until the last minute, with some events remaining 40 percent unsold until the event itself. This means there are plenty of opportunities for last minute Olympics travel.

Share price conclusions

All else being equal, one might expect to see a consistent picture of stock price falls for the host airlines in the post-Games period. This was indeed the case for two of the three airlines we analyzed whilst it could be argued that Air Canada’s price rise was exceptional for reasons related to its restructuring.

Air Canada aside, the post Games price falls of Aeroflot and Korean Air are likely reflect a ‘return to normal’ situation with stock prices once again reflecting normalized revenue and profit expectations.

Two conclusions stand out from this blog series:

Firstly, in the month prior to the host country announcement, significant and market-beating stock price gains accrue to the flag carrier airline associated with the favored bid city.

Secondly, in the three months leading up to the opening of the Games themselves, significant and market-beating stock price gains are enjoyed by the flag carrier airline of the host country.

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