Holiday and airline stocks tumble due to fears of further travel restrictions

Airline and travel stocks are the top fallers across markets this morning amid fears of further travel restrictions after the UK Government’s decision to impose a 14-day quarantine on travellers arriving from Spain. 

Tui, the UK’s biggest tour operator, topped the fallers’ list, with shares down 15 per cent, after it cancelled all mainland Spanish holidays until 9 August.

Budget airline easyjet was also deep in the red, with shares down almost 14 per cent, while British Airways owner IAG was down 10 per cent.

Ryanair shares were also hammered, falling 8 per cent after the budget airline said a second wave of infections was its ‘biggest fear’ as the pandemic already caused it to slump to a loss in what was its ‘most challenging’ quarter ever.

Airline and travel stocks are the biggest fallers among Britain’s top 350 listed companies 

Russ Mould, investment director at AJ Bell, said the new restrictions show that the recovery of the travel industry ‘will not be a smooth ride’.

‘The market is now pricing in the risk of restrictions on more countries and thus raising the potential for earnings estimates to be downgraded once again for travel-related industries,’ he said.  

Desperate for business, airlines and travel companies have been lowering the price of their flights and holidays, hoping to encourage more people to book trips. 

‘The Government imposing restrictions puts a spanner in the works and effectively derails their strategy for clawing back some of the losses experienced earlier this year,’ Mould said.

He added: ‘Many people don’t want to risk having to go through 14 days of quarantine after their holiday, particularly those who cannot work from home, and so it seems likely the Spain-related news will prompt more people to cancel their overseas trip this summer. It may also cause more people to think twice about booking a last-minute holiday.’

There are fresh fears of further travel restrictions after the Government's decision to impose a 14-day quarantine on travellers arriving from Spain

There are fresh fears of further travel restrictions after the Government’s decision to impose a 14-day quarantine on travellers arriving from Spain

It comes as Ryanair, which started flying again in July, today unveiled a loss of €185million (£168million) in the quarter to the end of June.

‘The past quarter was the most challenging in Ryanair’s 35 year history,’ the company said today.

‘Covid-19 grounded the Group’s fleet for almost 4 months (from mid-March to end June) as EU Governments imposed flight or travel bans and widespread population lockdowns.’ 

Despite fears of further travel restrictions, Ryanair said it will continue its flights in and out of Spain as normal.

Its chief financial officer Neil Sorahan told the BBC’s Today programme: ‘As things stand, the market remains open, the schedules remain in place and we continue to operate in and out of Spain as normal.’ 

EasyJet and Jet2 are also maintaining a full schedule, as British Airways, although it said the move was ‘throwing thousands of Britons’ travel plans into chaos’. 

Ryanair slumped to a loss as Covid-19 grounded the Group's fleet for almost four months

Ryanair slumped to a loss as Covid-19 grounded the Group’s fleet for almost four months

During the first financial quarter, Ryanair carried just 500,000 passengers, compared with 41.9million in the same period last year, causing revenue to collapse from €2.3billion (£2.1billion) to €125million (£113million).

Ryanair said this year will also be ‘very challenging’, and added: ‘It is impossible to predict how long the Covid-19 pandemic will persist, and a 2nd wave of Covid-19 cases across Europe in late autumn (when the annual flu season commences) is our biggest fear right now.’  

The company said it aimed to operate 40 per cent of its normal July schedule, increasing to 60 per cent in August and 70 per cent in September.

It also warned that travel in Europe was likely to remain depressed for the next two to three years, and that would offer opportunity to grow its network as it would be able to take advantage of ‘lower airport and aircraft cost opportunities that will inevitably arise’. 

It added that it could not provide any guidance for profits in this financial year, but added that it expected to carry 60million passengers this year. 

Adam Vettese, analyst at multi-asset investment firm eToro, says shareholders will have to get used to depressed profits, lower passenger numbers and share price uncertainty ‘for the foreseeable future’. 

‘The problem for the industry is that there is seemingly no end in sight, with a worrying rise in cases in countries such as Spain, France and Germany threatening to turn into a deadly second wave,’ he says. 

‘One positive for Ryanair is that it has a large level of cash on its balance sheet. But if passenger numbers are down for an extended period of time, then this financial safety net will soon disappear.’  

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