Shares in the European tourism sector sank on Monday morning when investors became anxious about a surge in coronavirus cases in the region.
The top sixteen travel and leisure stocks in Europe fell more than 3% in the first hour of trading, with Tui, easyJet and International Airlines Group, the owner of Iberia and British Airways, all by 10%.
Investors are concerned about a recent jump in infections in certain European regions and the subsequent implications for travel. Spain, for example, has seen an increase in new cases since July 15. According to Reuters, which cited data from the Health Ministry, new infections have reached more than 900 in recent days, a level not seen since the country reopened its economy in late May. .
The UK government surprised many tourists over the weekend with the decision to remove Spain from the list of quarantine-exempt countries upon arrival in England. This occurred after the regions of Catalonia, Aragon, Madrid and the Basque Country saw an increase in the number of Covid-19 cases. The Spanish government has said that the regional outbreaks are under control and that the country is safe for Spaniards and visiting tourists.
A second wave of Covid-19 cases in Europe in late fall … is our biggest fear right now.
Tui decided to cancel all vacations in mainland Spain until August 9. Ryanair has said it will not cut its flights to Spain and said the UK government’s decision was “regrettable”.
France has also advised its citizens to avoid traveling to the most affected regions of Spain.
Luxembourg, Romania, Bulgaria, Sweden and Spain have registered the highest number of accumulated infections (per 100,000 people) in the last 14 days in the entire region, according to the European Center for Disease Prevention and Control.
This has led, for example, to the Greek government to request a negative test result for those traveling to the country from Bulgaria and Romania.
“I don’t think this is an immediate major economic consequence (relative to what we already have), but if this is happening in midsummer, the question arises as to where we will be in November,” analysts at Deutsche Bank said. in a note Monday about recent cases in Europe.
Some analysts expected the summer months in Europe to be much calmer in terms of new cases, associating the winter period, when people tend to have colds and flu, as the most likely period for a second wave in the region. Disease specialists have argued that a recent increase in cases may actually be just a continuation of the first wave, with some suggesting that the number of infections would have to reach a low single digit in a country for the first wave to be classified. as finished.
“We believe that the sudden change in (UK) government policy could negatively affect customer booking confidence,” analysts at Jefferies said in a note Monday, suggesting that tourists might choose to stay or simply not take a vacation this summer.
Ryanair staff member seen in protective masks presenting security flight information at Krakow Balice airport
NurPhoto | NurPhoto | fake pictures
Although this could boost national tourism industries, it poses challenges for airlines and the sector in general in Europe. Ryanair said Monday morning that it expects a “very challenging year” in the wake of the coronavirus-related uncertainty.
“It is impossible to predict how long the Covid-19 pandemic will persist, and a second wave of Covid-19 cases across Europe in late fall (when the annual flu season begins) is our greatest fear right now,” he said. the Irish carrier. .
Speaking to CNBC on Monday, Mark Manduca, managing director of Citi Research, said these sudden restrictions would be the “new normal” for short-haul flights in Europe, which until recently seemed the only viable option for investors in the sector in the middle of closing borders.
He explained that the recent change to UK quarantine policy has meant that “summer can be taken away at any time” and this will create a “ripple effect across the European (airline) market.”
Other parts of the world, such as India and Hong Kong, have also reported a higher number of infections. At the same time, the situation in the United States and Latin America is far from under control.
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