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Travel shares sink after UK imposes quarantine on Spanish trips

“It shows the clear risks to the travel industry that its recovery will not be a smooth ride,” an analyst said

easyJet plc -

Travel sector stocks lurched lower on Monday after the UK resumed special quarantine measures on people arriving from Spain.

Shares in airlines including easyJet (LON:EZJ), Ryanair (LON:RYA) and British Airways owner IAG (LON:IAG), cruise and tour operators Carnival (LON:CCL) and TUI (LON:TUI), online estate agents On The Beach (LON:OTB) and travel sector service providers like SSP (LON:SSPG) and WH Smith (LON:SMWH) were all in the red.

This followed the imposition of the new rules at the weekend for Spanish travel. 

“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,” said Russ Mould, investment director at AJ Bell.  

The government decision is news the travel industry was hoping would not happen as such restrictions were imposed will require anyone travelling from the Iberian country to undertake 14 days of quarantine.

With chances that the government could bring such restrictions for other countries with virus flare-ups, it is expected to prompt more people to cancel their holiday plans for the coming months or rethink a last-minute trip.

“It shows the government is finally capable of taking decisive action to stop the spread of coronavirus rather than simply monitoring the situation from the sidelines. Secondly, it shows the clear risks to the travel industry that its recovery will not be a smooth ride,” Mould said.

Newspapers were full of angry first-hand accounts from British holidaymakers facing two weeks’ house arrest when they return, with complaints about the lack of notice prior to the announcement.

Ministers insisted they acted as soon as they saw the latest data, with coronavirus cases in Spain surging since it emerged from lockdown on June 21. Spain's health ministry logged almost 1,000 new infections per day at the end of last week. 

Mould added: “Airlines are already desperate for business, running promotions for cheap flights and holidays. They need to boost cash flow by encouraging more people to book trips, whether for this year or next, and they want to send a message that the travel sector is back open for business.

“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.”

Also on Monday, Ryanair reported a swing to losses for the first quarter though it expects to cover 40% of its usual schedule in July, rising to around 60% in August and 70% in September. 

The Irish carrier expects passenger numbers to fall around 60% to 60mln for the year to next March, but said it “biggest fear” is a second wave of COVID-19 infections in late autumn at the start of the normal flu season.

 

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Price: 594.2 GBX

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