finance

Airline stocks lower as latest government plans disappoint



© Reuters.

By Samuel Indyk

Investing.com – Shares in UK airlines were grounded on Friday after the government’s latest plans for international travel disappointed the industry.

Transport Secretary that Malta, Madeira, and the Balearic Islands (including Ibiza, Majorca, and Menorca) were getting added to the ‘green’ list, meaning passengers would not have to quarantine upon their return to the UK.

Several Caribbean islands and UK Overseas Territories were also added to the list, which comes into effect from 04:00am on Wednesday.

“The UK Government’s decision to put Malta and Ibiza on the green list for travel gave some renewed hope for the travel sector,” said AJ Bell investment director Russ Mould. “However, the industry is still frustrated at restrictions which continue to cast a cloud over whether the public will be able to freely visit popular destinations this summer such as mainland Spain and Greece.”

Vaccinations

There was hope from some the industry that Shapps would also announce plans to allow fully vaccinated passengers to avoid quarantine restrictions returning from ‘amber’ list countries, such as Spain, France, Italy and Greece.

However, Shapps said plans to allow double-jabbed passengers to skip isolation would come “later in the summer”.

The move has disappointed many in the industry, including budget airline EasyJet (LON:), who said the timetable “simply isn’t ambitious enough”.

The big question now is whether the addition of more countries to the ‘green’ list will cause a surge in bookings. Alongside the decision, the government announced that all the countries on the ‘green’ list were also added to the ‘green watch’ list, meaning they could be dropped back to ‘amber’ at relatively short notice.

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“While we’re confident that the pent-up demand is ready and waiting to fly, the headache that came with Portugal’s downgrade may not be so easy to forget,” said Hargreaves Lansdown (LON:) Equity Analyst Laura Hoy in an emailed note.

Restrictions in other countries – EU position

Even if later in the summer, the UK government makes international travel easier for passengers, other countries may still maintain curbs on British passengers. Germany and Italy currently have quarantine restrictions on UK arrivals and Merkel has urged a common EU position.

Yesterday’s EU Summit ended without a formal agreement on the UK, but the 27 leaders pledged to be “vigilant and coordinated with regard to developments, particularly the emergence and spread of variants”, and many leaders sounded as if they would be onboard with a EU-wide policy.

French President Macron said the EU needs to “be really taking coordinated decisions in terms of opening of borders to third countries”.

All the companies in the sub-index were trading lower on Friday, including airlines easyJet, IAG (LON:) and Wizz Air (LON:). Ryanair (LON:) shares were also lower, as were tour operators Tui (LON:) and Jet2 (LON:).

Rolls-Royce (LON:) shares also slumped as the company relies on its engines clocking up the air miles.

“The group’s bread and butter comes from servicing and delivering widebody aircraft engines, which are used primarily for long-haul flights,” Hoy added. “While the green list additions are good news, a few reopened routes isn’t enough to excite investors.

“That’s because Rolls’ own recovery won’t materialise until after the airlines are back to business as usual.”

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