Spanish quarantine restrictions impact travel companies
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Shares in companies in the travel sector suffered a downturn in early trading this morning.
It follows the Government’s decision to reintroduced quarantine restrictions on travellers returning from Spain, following an increase in COVID-19 infection rates there in recent days.
The first hour of share dealing saw declines in many travel-related companies, including Manchester-based online holidays company On The Beach, which saw its shares decline by four per cent in the first hour of trading.
Other companies to suffer in early dealing were: TUI -14%; easyJet -12%; International Consolidated Airlines -10%; Ryanair minus seven per cent; Carnival minus eight per cent; Wizz Air minus four per cent; InterContinental Hotels minus four per cent; and Trainline, minus three per cent.
Russ Mould, investment director at Manchester investment platform AJ Bell, said: “The UK’s decision to impose quarantine measures on people arriving from Spain is the news the travel industry hoped would never happen.
“Firstly, 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.
“Shares in airlines, cruise operators, holiday sellers and service companies linked to the travel sector have slumped following the weekend’s new rules on 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.”
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.
“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.”
Ryanair, which flies to a total of 70 destinations from both Liverpool John Lennon Airport and Manchester Airport, said it is not planning to reduce capacity flying to Spain after the British government’s “regrettable” decision to advise against all non-essential travel to the country’s mainland, said chief financial officer Neil Sorahan today.
But, announcing its second quarter results this morning, the impact coronavirus has wreaked on the industry is starkly clear.
It posted an after-tax loss of £168.64m for the three months to June 30, its first ever loss in the quarter.
This follows a cut of 99% of its capacity as Europe locked down in the face of the COVID-19 pandemic.
And it cut expectations for the rest of its financial year, to March 31, when it said it expected to fly 60 million passengers, rather than the 80 million it forecast in May – down from 149 million last year.