Beaten-down airline stocks celebrate easing of travel rules


British Airways owner IAG SA has been the star of the show in the last two weeks, soaring 21% after the White House said America would open up to vaccinated foreigners and the UK relaxed coronavirus testing requirements for fully jabbed arrivals.

NEW YORK: The easing of United States and United Kingdom’s travel restrictions is breathing new life into European airline stocks.

British Airways owner IAG SA has been the star of the show in the last two weeks, soaring 21% after the White House said America would open up to vaccinated foreigners and the UK relaxed coronavirus testing requirements for fully jabbed arrivals.

Air France-KLM and Deutsche Lufthansa AG have also rallied strongly, as have budget carriers such as Ryanair Holdings Plc.

But investors are divided on whether the gains can last and the industry has been a laggard for a long time. European airlines remain about 25% below pre-pandemic levels, underperforming sectors like industrials and retail, which are up as much as 30% from where they were back then.

The catalyst of air-travel reopening could be just what they need for a more sustained revival, though the possibility of fresh restrictions is a constant risk.

Air France KLM Group logoAir France KLM Group logo

Investors should look “very seriously” at so-called reopening sectors like travel, said Alan Custis, head of UK equities at Lazard Asset Management.

“The opportunities now, one would argue are much, much better, perversely, than they would have been probably if the pandemic hadn’t happened.”

That’s because excess capacity in aircraft, hotel rooms and restaurants has been eliminated, Custis said in an interview. “There’s been a sea of change.”

A similarly positive stance is held by Mamta Valechha, an analyst at Quilter Cheviot, which manages about £25bil (US$34bil or RM142.41bil).

“We do continue to see value in the travel sector, particularly airlines which have been hit the hardest and are still way off their 2020 peaks,” Valechha said.

LufthansaLufthansa

Positive news is starting to gather pace. The relaxation of US rules led to a surge in bookings from Europe to the US. Air France-KLM reported a spike in Christmas bookings, while Lufthansa was upgraded at Goldman Sachs.

And while analysts have been slow to raise estimates for airlines, consensus is on an upward slope. Data compiled by Bloomberg suggests the sector could be profitable again within about a year.

Other areas of the travel industry are also showing better signs. Tour operator TUI AG added 10% in three days after Britain said on Sept 17 that it would scale back testing requirements and simplify its country risk rankings. — Bloomberg

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

   

Next In Business News

ES Ceramic posts strong Q1 growth
Southern Cable bags RM18.5mil TNB contract
Sunway Malls to launch Sunway eMall.com to boost presence
MIDA, MEDEF ink MoU on collaborative efforts
Car sales revved up in September as curbs lifted
German-based H&R to invest RM200mil in speciality plant in Perak
IOI Investment offers to purchase US$600m debt notes
Straits Energy Resources unit to acquire RM14.5mil oil tanker
RAM: Edra Solar’s debt service capacity to be strong
Moody's assigns first-time ratings to Hibiscus; outlook stable

Others Also Read


Vouchers