Shares in British Airways owner International Consolidated Airlines (IAG) and low cost airline Ryanair (RYA) gained along with other travel stocks despite both being hit by an investigation which could compel them to refund customers.

The Competitions and Markets Authority said Ryanair and British Airways’ stance in not offering refunds to customers who legally couldn’t take flights because of Covid restrictions may breach consumer law.  The airlines offered other options but refused refunds.

The CMA said it has written to the airlines to try to resolve its concerns. But if the airlines push back, it can seek a court order to force them to refund passengers and make changes to their practices.

Despite that, Ryanair shares gained 2.4% to €16.93 and IAG increased 3.6% to 205.2p, with the market more interested in news that the European Union is set to make available its Covid-19 passport for all EU citizens and residents, as well as for specific categories of travellers from third countries, by 1 July.

Other gainers included budget airlines EasyJet (EZJ), up 2.8% to 994p, and Wizz Air (WIZZ), up 2% to £47.54, and package holiday providers TUI (TUI), up 1% to 420.9p, and Jet2 (JET2), up 2.5% to £12.99.

EXPERT VIEW

AJ Bell investment director Russ Mould said ‘it should come as a surprise to no-one’ that Ryanair and British Airways are ‘still being dragged over the coals’ by the Competition and Markets Authority over the way they tried to ‘squirm out’ of refunding customers who couldn’t fly during the pandemic.

Mould said: ‘Their actions did them no favours at the time, making customers angry and potentially alienating many people from flying with them again.

‘That said, a lot of people declared at the start of the Covid crisis that they wouldn’t use businesses which treated staff or customers unfairly during the pandemic, such as airlines and pub operator Wetherspoon. However, the backlash against such companies seems to have quickly faded.’

He added: ‘They’re still operating under severe restrictions, so the natural response from the airlines would be to criticise the CMA probe, implying it is kicking an industry which is already on its knees.

‘Aside from potentially losing business in the future from irate travellers turning their backs on the airlines, the worst-case scenario might be compensation for some affected customers. The airlines would kick and scream, but ultimately they would pay and move on.’

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Issue Date: 09 Jun 2021