Wed. Jan 26th, 2022

European tourism and airline shares rose sharply on Tuesday as investors bet the Omicron coronavirus variant would cause less disruption than initially feared.

Shares in British Airways owner IAG, easyJet and Wizz Air gained 10 per cent in morning trading in London, while German tour operator Tui rose 9 per cent.

Shares of other European airlines, including Ryanair, Lufthansa and Air France, rose about 5 per cent, contributing to gains on Monday when the London market closed.

Airline and tourism stocks were particularly sensitive to Covid disruption, so any signs that the Omicron outbreak may be less damaging than expected are likely to help stocks, analysts said.

In the UK, the Johnson government has resisted the introduction of significant new Covid restrictions, and on Tuesday leading epidemiologist Neil Ferguson said the spread of Omicron among adults could flattened in London.

Germany on Tuesday eased travel restrictions on the UK and several Southern African countries, while the UK’s travel rules, which include costly tests before and after flights, will be reviewed later this week.

The gains helped the European Stoxx 600 travel and leisure index rise by more than 2 percent and reach its highest level since late November, before Omicron was declared a variant of concern by the World Health Organization.

Shares in IAG and easyJet have risen 25 percent since mid-December, although they are still trading well below their pre-pandemic levels.

“These shares fell seriously in December. . . so people get away from that extreme negativity, ”said Alex Irving, an aviation analyst at Bernstein.

While winter travel has been hit hard by Omicron, no airline has yet warned of a hit after next summer’s peak season.

Shares in airlines, including Lufthansa, Air France and IAG, were also boosted by a Citigroup research note that on Monday predicted a strong recovery for long-distance-focused airlines, thanks to growing demand for air cargo, a stronger-than-expected recovery for corporate travel and the expected reopening of Asian borders.

Shares in major U.S. airlines also rose between 3 and 4 percent on Monday as investors shook off thousands of flight cancellations caused by Covid-related staff absences and severe weather to focus on the sector’s long-term prospects.

“International travel is expected to be very strong this summer[for US airlines]. . . we think the Omicron variant has delayed the return to significant international travel by about two months, ”said analysts at investment bank Cowen.

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