Shares in tour operators and airlines plunged after the UK Government’s shock decision to introduce a 14-day quarantine on all arrivals to the UK from Spain.
British Airways owner International Consolidated Airlines (IAG) was the biggest faller in the FTSE 100 with its shares dropping 9.2% to 180p.
Tour operator TUI(TUI), which has cancelled all holidays to mainland Spain until 9 August, and budget airline EasyJet (EZJ) were the biggest fallers in the FTSE 250, tumbling 13.3% and 10.5% to 294p and 527p respectively.
Shares in Jet2 owner Dart Group (DTG:AIM) also fell significantly, down 12.7% to 594p.
SPAIN KEY FOR TUI AND JET2
Spain is a key market for both TUI and Jet2 in particular, with holidays to the country accounting for around 30% of TUI’s revenue and around half of Jet2’s sales.
July and August are crucial trading months for both airlines and package holiday companies as they look to offset losses made in the quieter winter period.
Analysts at Jefferies pointed out that in the very short term, changing advice to mainland Spain means that tour operators will be obliged to refund customers, meaning a cash outflow at a time of upfront cost investment for restarting their holiday programmes.
But more importantly, the analysts think the sudden change in Government policy could negatively impact customer booking confidence, which could lead to a weaker ‘lates’ market with customers deciding to have a staycation or not take a holiday, as well as a delayed booking cycle for next year.
The ‘lates’ market, where customers book flights or a holiday at the last minute, is seen as an important part of any recovery in the travel sector this summer.
RYANAIR REVEALS VIRUS HIT
The shock Spain quarantine decision comes as low cost airline Ryanair (RYA), whose shares also took a hit as they fell 5% to €10.35, revealed that passenger traffic fell 99% in the three months to 30 June, amid the height of the coronavirus pandemic.
In its first quarter trading update, Ryanair said traffic fell from 42 million passengers to just 500,000, with the airline mainly operating repatriation, rescue and emergency medical flights.
Revenue fell 95% to €125 million compared to €2.3 billion in the same period a year ago, while the company also swung to a net loss of €185 million, compared to a €243 million profit after tax in the first quarter of its 2019 financial year.
However, Ryanair’s first quarter loss was less than the €232 million analysts had been expecting, who point out that the airline’s balance sheet remains one of the strongest in the industry with €3.94 billion in cash.
