“It looks like the travel sector will be blessed with some semblance of a travel season, with some of the UK’s most popular destinations given the green light.
UK's Travel Sector Gets A Green Light
The Balearic Islands, which include hot spots like Ibiza and Mallorca, have been shifted to the green list alongside Portugal’s Madeira, Malta and a handful of UK overseas territories. Shares in Ryanair, easyJet, Wizz Air and Tui all moved higher off the back of the announcement.
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It’s a key development the majority of the airlines at this point. Long haul carriers like British Airways parent IAG will see few benefits from the phased re-opening. Domestic travel within Europe is still the largest segment for IAG, but roughly 30% of its business is reliant on travel to and from North America, which is still on hold.
For low cost carriers, this news is a welcome tailwind. easyJet has already proven it’s ready to scale up its operations as needed to accommodate the ever-changing list of travel-friendly locations. No one will be heaving a larger sigh of relief than Ryanair’s Michael O’Leary, whose strategy has been arguably the boldest among the group. Ryanair took delivery of its first batch of “Gamechanger” aircraft just days after Portugal was removed from the green list, stoking fears that the O’Leary’s decision to take advantage of favourable pricing and up its aircraft orders was a bit premature.
Rolls Royce Shares Slump
Further up the food chain, Rolls Royce shares slumped. The group’s bread and butter comes from servicing and delivering widebody aircraft engines, which are used primarily for long-haul fligths. While the green list additions are good news, a few reopened routes isn’t enough to excite investors. That’s because Rolls’ own recovery won’t materialise until after the airlines are back to business as usual.
The big question now is whether the flurry of excitement over the newly green destinations will be enough to spur on new bookings. While we’re confident that the pent-up demand is ready and waiting to fly, the headache that came with Portugal’s downgrade may not be so easy to forget. Plus, it’s not just the UK restrictions we have to worry about. Shifting quarantine regulations in some European countries following German Chancellor Angela Merkel’s calls for all British travellers to quarantine could add yet another spanner to the works.“
Article by Laura Hoy, Equity Analyst at Hargreaves Lansdown
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