Several companies badly hit by the pandemic are set to be ejected from blue-chip stock indexes in Europe, a demotion that will prompt funds managing billions of dollars of investments to sell their shares.
Deutsche Lufthansa AG will drop out of Germany’s DAX on June 22, index provider Deutsche Börse Group said Thursday. The embattled airline has been a member of the index, which tracks the 30 largest and most-heavily traded companies on the Frankfurt Stock Exchange, since it was created in 1988. Lufthansa will be replaced on the DAX by property company Deutsche Wohnen SE.
A Lufthansa spokesperson declined to comment.
Shares in Lufthansa tumbled between February and late April, when restrictions on movement grounded flights around the world. They remain 34% lower than they were at the end of 2019, despite rallying in recent weeks amid optimism about the relaxation of lockdown measures in Europe.
Lufthansa is awaiting shareholder approval for a €9 billion ($10.2 billion) bailout by the German government, and has warned investors that air traffic will remain well below pre-coronavirus levels in 2021.
Relegation to the second-tier MDAX will prompt funds that track the DAX to sell shares in the airline. These include BlackRock Inc.’s iShares Core DAX UCITS ETF (DE), an exchange-traded fund that manages assets worth €5.63 billion, as well as a smaller €33.3 million ETF run by Vanguard Group.
Empty customer service desks in a Lufthansa departure lounge at Munich airport on Wednesday.
Photo: Michaela Handrek-Rehle/Bloomberg NewsIn the U.S., companies may leave or join the benchmark S&P 500 index in a quarterly rejig due to take place June 22. The reshuffle was postponed in March due to high market volatility.
Other European companies that have suffered from restrictions on movement and travel are set to topple out of blue-chip indexes. Budget airline easyJet PLC and cruise operator Carnival PLC will lose their position in London’s FTSE 100 at the close of trading June 19, FTSE Russell said this week.
Shares in easyJet, which plans to hunker down for a long period of low demand for flights by cutting almost a third of its workforce, are down 39% this year. Carnival shares have dropped 64%. After toppling out of the FTSE 100, the stocks will have to be sold by funds including BlackRock’s iShares Core FTSE 100 UCITS ETF, which manages around £8 billion ($10.1 billion) in assets.
A spokesperson for easyJet declined to comment on its ejection from the FTSE 100. A Carnival spokesperson said the company valued its inclusion in the broader FTSE 350 index.
Dropping out of the DAX is unlikely to impair Lufthansa’s ability to raise money in the capital markets, said Daniel Roeska, an analyst at Bernstein. Moody’s Investors Service’s recent decision to downgrade Lufthansa’s credit rating to junk poses greater constraints, because it could force the company to borrow more money on a secured basis, he added. This would involve putting up airplanes as collateral.
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Write to Joe Wallace at Joe.Wallace@wsj.com
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