Airline stocks came back from the long Easter weekend with mixed reactions as rules on international trips remain a question mark.
Boris Johnson said on Monday he was “hopeful” that international travel could resume on May 17 as per roadmap, but it is too early to make a firm decision.
READ: Ryanair and Wizz Air passenger numbers collapse in March as COVID-19 continues to ravage travel sector
The government said it will confirm “in advance” of that date but uncertainty remains because of infection and vaccination rates in other countries.
When foreign travel will be allowed again, Westminster is planning to implement a ‘traffic light’ system based on the level of risk in the country where the passengers are coming from.
It would add a ‘green’ category to the current system, with people not required to quarantine although COVID-19 tests will remain mandatory, although no countries have been added to the list yet.
It’s also not clear whether vaccinations will remove the need for these measures and whether a ‘covid passport’ will be agreed with Europe.
According to current measures, travellers from the UK and the European Schengen area can’t enter the US while the EU Commission is discouraging non-essential travel to and from the UK.
The latest announcement was met with criticism by big industry names.
easyJet plc’s (LON:EZJ) boss Johan Lundgren said that the traffic light system would prove too expensive if people coming from ‘green’ countries have to take pre-departure and post-arrival tests, which could cost up to £200 each.
“You wouldn’t open up international travel for everyone, but only those who can afford it,” he told the BBC.
“If you are ticking all of those boxes to become a green destination… [Multiple tests] don’t make sense to me and it would add to cost and complexities.”
Trade bodies have called for more details to plan ahead, with the Business Travel Association saying that Boris Johnson’s statement was “beyond disappointing”.
“Whilst we support the establishment of a framework for restarting international travel and welcome the removal of self-isolation for arrivals from green countries, today’s announcement does not provide the clarity we were seeking on the roadmap back towards normality,” said Tim Alderslade, chief executive of Airlines UK.
Some stocks rise despite sector pressure
London-listed airlines had mixed reactions, with British Airways owner International Consolidated Airlines Group SA (LON:IAG) adding 2% to 214.5p, TUI AG (LON:TUI) rising 1% to 385.6p and easyJet staying parked at 1,008p.
Analysts at Peel Hunt said that the continued uncertainty, alongside the UK government advising against booking, is likely to restrict short-term cash flow and make yield management “much more difficult”.
“The risk that destinations move from green to amber or red is also likely to discourage international travel and may result in overcapacity and depressed yields,” analysts commented.
The broker noted that demand for holidays should return as soon as it is permitted but demand for business travel and migration may not bounce back as quickly.
This could hit Ryanair and Wizz Air because they are not purely holiday companies.
Meanwhile, analysts at Berenberg believe TUI faces an uncertain future with a capital structure which is unsustainable, significant debt maturities rapidly approaching, doubt about the resumption of operations and continued meaningful cash burn.
TUI confirmed at its first-quarter results in February that 2.8mln bookings had been made for the summer season, yet despite the apparent surge as vaccinations accelerated, the same number of bookings had been made six weeks later at the AGM.
This means that as many bookings were cancelled as were booked in the intervening period, the broker said, adding that shares in the FTSE 250 firm remain overvalued.