The share price of major airlines is on an ongoing downward trajectory as a result of the new wave of Covid-19 infections around Europe which is causing countries such as Austria and the Netherlands to impose lockdown measures.
Compared with the last few days, the share price of major carriers such as IAG and Ryanair went down 2.9 and 2.7 per cent respectively, while Easyjet’s shares plummeted by 3 per cent at 10.30am today.
Despite some of airlines picking up during the course of the day, investors remain spooked.
“The share price descent comes amid warnings from the World Health Organisation that there could be an additional 700,000 new deaths in the region, taking the total to 2.2 million by March,” said Susannah Streeter, Hargreaves Lansdown’s senior investment and market analyst.
“This has caused fresh turbulence for airline companies, which had glimpsed light through the clouds as bookings, especially on lucrative transatlantic routes were expected to bounce back in the spring.
“But there are now concerns that surging infections and lockdowns will depress the confidence of the travelling public.”
According to Streeter, investors are reacting to Ryanair’s boss Michael O’Leary warning of Christmas disruptions if the situation does not improve.
“Up until last weekend, things were going great. Volumes were back running at about 100% of our pre-COVID price volumes,” he said during an online event. “It has been disrupted by the Austrian lockdown and there is a renewed concern across Europe about a fourth or firth wave of Covid.
“I think we’re in for a fraught period between now and Christmas where it looks like Europe is going to get very nervous again at the worst time of the year when people are making their Christmas travel plans.”
A winter full of European lockdowns and potential restrictions is not the only motive behind the dump in share price, but was also influenced by the price of oil remaining high.
“The upwards path of the oil price is a particular concern for the airline sector given that fuel makes up 25 – 30 per cent of the operating costs of an airline,” Streeter added. “Although hedging may give some airlines breathing space for now, it’s still an ongoing worry.
“There were high hopes that brighter skies would emerge by the spring but now storm clouds appear to be gathering over the sector once again.’’
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