Airport Turmoil Is Sending Airline Bonds Into Distressed Zone

Investors are exiting airlines’ bonds as the industry that was set to benefit from pent up demand for travel following the pandemic is instead besieged by labor strife, higher energy prices and consumers squeezed by surging inflation.

Debt from European airlines is posting its worst monthly return in June since the onset of the pandemic and yields are the highest since October 2020, indexes show. Debt from companies ranging from budget airline EasyJet plc to flagship German carrier Deutsche Lufthansa AG are trading just above levels considered distressed.

Although travel demand has rebounded dramatically in Europe, what had been touted ...