A heatwave may be on its way, ending a period of dispiriting weather. But even though Britain is basking in sunshine, many of us will still be booking a holiday abroad. 

It’s a preference that investors carrying out a midsummer portfolio review should note.

The unquenchable desire for an overseas break seems to be the most lasting post-pandemic consumer behaviour shift, according to airline bosses. 

Previously this type of ‘revenge’ expenditure was viewed by some to be a transitory phenomenon.

Luis Gallego, chief of IAG, owner of British Airways, says ‘the high demand for travel is a continuing trend’ while Wizz Air boss József Váradi also senses that a fortnight on the beach or by the pool is regarded as a priority.

As a result, the International Air Transport Association (IATA) is expecting record passenger numbers this year. The recovery is being driven by shorthaul flights, packed with tourists.

Corporate travellers are also returning, with tech bosses favouring meeting in person over Zoom. Until other executives decide to get airborne, affluent individuals, willing to pay extra for comfort, are occupying business class seats.

Tom Gilbey, at Quilter Cheviot, highlights the benefits flowing from the new mood of rationality in the sector.

Post-pandemic consolidation has made the industry leaner. Meanwhile, the problems at aircraft manufacturer Boeing have limited the growth in fleet capacities, thus curbing possibly over-ambitious expansion plans. 

He comments: ‘This combination of a disciplined supply side and a robust demand environment suggests a positive outlook for the airline sector moving forward.’

Investors excited at the opportunities on offer must be prepared for global shocks that cause havoc in the airline industry, as Covid illustrated.

Also, even before the announcement of the general election, Johan Lundgren of easyJet and Michael O’Leary of Ryanair sensed that some customers were becoming more resistant to high ticket prices. 

The suspicions surrounding the Labour government’s true plans for tax rises may make more households wary about splashing out.

Meanwhile, in the longer term, there is the possibility of further legislation to limit the environmental impact of flying. 

IATA is forecasting that airlines worldwide will use 99billion gallons of fuel this year, an increase of 3 per cent on 2019 consumption.

As a consequence of these factors, there is no guarantee of up-up-and-away performance, but there are bargains on offer.

IAG

International Consolidated Airlines has an empire that encompasses not only British Airways, but also Aer Lingus, Iberia and Vueling.

The company’s debt mountain has been reduced and Gallego is confident that the turnaround will not be reversed. 

Yet IAG shares stand at 164p – 47 per cent below their level of five years ago – and trade at just four times earnings. 

Analysts at BNP Paribas Exane and JP Morgan are among those who believe that the stock is undervalued. 

This week, for example, Ruairi Cullinane of RBC reiterated his view that IAG was a ‘buy’ with a target price of 230p. The average target price is 270p.

EasyJet

Most analysts rate this low-cost carrier a buy despite the fears that ‘revenge’ spending on getaways may be slackening.

At 449p Easyjet shares are 40 per cent below five years ago, but there are hopes of revival since the average analysts’ target price is 706p.

Lundgren steps down from the top job next year, having built a profitable package holiday division and slashed borrowings.

Ryanair

Ryanair, run by the perennially choleric O’Leary, is now Europe’s largest airline. 

But it has been hit hard by the issues at Boeing which have delayed the arrival of new planes for the fleet. 

Ryanair shares have fallen by 11 per cent since the start of the year to €17. 

But most analysts still rate Ryanair a ‘buy’, with an average target price of €24.96.

O’Leary pockets a €100m bonus if the share price stays above €21 for 28 days. 

In this sector, there is little embarrassment over soar- away pay.

Jet2

This Aim-listed business is not only an airline, it is also Britain’s largest tour operator, an activity that offers chunkier margins.

Jet2 shares are up 4 per cent this year to 1298p, having soared by 442p over the past decade.

Most analysts consider Jet2 a ‘buy’, with an average target price of 1892p. Airlines’ pricing power is set to be tested. 

But Jet2’s good behaviour during the pandemic – deposits were refunded in a timely way – could afford the company an advantage over its rivals.