The Ebola virus has the potential to impact dramatically on global airline stocks if analysts' assessments of previous contagious epidemics are to be believed. The threat of a global pandemic has the ability to set investors panicking and markets crashing. Yet between events in Syria, Iraq, Ukraine and Russia, the news on Monday 6 October that the Ebola virus has reached mainland Europe made the headlines only briefly, before being pushed down the agenda.
The Ebola threat's effect on the travel sector, and airlines in particular, is being noted by analysts. Particularly, perhaps, in light of reports on Wednesday (8 October) that a second person in Madrid has been admitted to hospital under the suspected infection the disease.
Tony Shepard, a travel and leisure analyst at Charles Stanley, notes that 'health concerns are one of the many factors which can affect the demand for air travel.' Shares declines this week have at least started to level off although the major UK-listed stocks remain down. International Consolidated Airlines Group (IAG) is 1% off to 341.9p), Easyjet (EZJ), down 2.3% at £13.57, and Ryanair (RYA) has also shed 1.4% to ?7.02.
All three airlines have operations in Spain with IAG's Iberia and Vueling businesses giving it the biggest exposure, which goes some way towards explaining why the stock saw declines of 7% on 7 October. It's also worth noting, as Shepard does, that 'France is the most exposed European country to the Ebola virus because of its French speaking links to West Africa.' At the Paris airports, EasyJet is the second, while Shepard also point out that West Africa is 'not a major source of revenue,' for IAG.
But revenue of course is only partly the issue, fear and its perception are the main price catalysts for now. Analysts from both Charles Stanley and Cantor Fitzgerald look to the SARS (Severe Acute Respiratory Syndrome) outbreak of 2002/3 for guidance. SARS was an airborne viral disease which spread from China and Hong Kong. It infected about 8,400 people and there were 775 reported deaths.
Cantor's Robin Byde notes that 'during the period Nov. 2002 to March 2003 the global airlines sector fell by c.25% as tourism in some regions fell by 90%.' Byde does point out however that 'the sector rebounded strongly (by c.50%) in the following six months, helped by a strong recovery in the global economy.'
