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magazineTravel stocks hammered on quarantine chaos
Travel stocks continue to take a hammering as a rising number of destinations come under the threat of facing quarantine measures from the UK Government.
Following on from popular holiday destinations France and Malta being suddenly removed from the UK’s travel corridor list last week, reports suggest Greece, Croatia and Turkey could be removed as well. The mandatory 14-day isolation for arrivals from Spain is also still in place.
For airlines and package holiday companies, the news couldn’t come at a worse time. Summer is the crucial trading period for these businesses as they look to recoup the losses made in the quieter winter months.
The most heavily affected in share price terms are tour operators TUI (TUI) and Jet2 owner Dart Group (DTG), plunging 15.4% and 16.4% respectively since France was added to the quarantine list.
Budget airline EasyJet (EZJ) has also been hit hard, with its shares falling 12.9% over the same period. The company also announced it is closing its bases at London Stansted, London Southend and Newcastle airports, in a move which will also have ramifications for London Southend Airport owner Stobart (STOB).
Wizz Air (WIZZ), which operates routes mainly to central and Eastern Europe, has been least affected by the quarantine measures. Its shares are actually up 1% in the wake of the new measures.
Also not helping TUI, an Anglo-German company, is the decision by Germany to add Spain to its quarantine list. Albeit referring to potential Brexit risks, TUI said in its 2019 annual report, ‘If we were unable to continue to fly intra-EU routes, such as from Germany to Spain, this would have a significant financial and operational impact on the group.’
Spain is a key market for both TUI and Dart Group, accounting for around 30% of the former’s overall revenue and 50% of the latter’s.
While the full impact and scale of quarantine measures has yet to become clear, they are having an impact on earnings forecasts. The latest consensus forecasts compiled by Refinitiv now show airline earnings taking a bigger hit than was expected three months ago.
A 2022 rebound is still expected for all the airlines, but the hit to 2021 estimates has significantly increased.
Given its more central and eastern European focus, Wizz Air is predicted to hold up best.
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