Investors have ditched airline shares in recent weeks as bookings slow
A surge of coronavirus cases in continental Europe has cast a shadow over the travel industry’s recovery, with Ryanair chief executive Michael O’Leary forecasting a “fraught period” over the next month.
Covid cases and deaths are rising quickly across many countries in the region, and several, including Austria and Slovakia, have imposed short national lockdowns in an attempt to rein in infections.
Concerns about a weak winter have hit travel stocks, with shares in easyJet, British Airways’ owner IAG and Europe’s largest hotel group Accor each down about 15 per cent over the past three weeks.
O’Leary said it was “inevitable” that rising Covid cases would disrupt travel. “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,” he said this week.
The uncertainty could also weigh on early bookings for next summer, which tend to come in between Christmas and New Year, he added.
Airlines have slightly pared back their flight schedules, and the number of scheduled seats in western Europe has fallen over the past three weeks, according to data from OAG.
“European travel intentions have been affected by the rise in Covid cases across the continent, and by the lockdowns and announcements in many European countries,” said Axel Hefer, chief executive of Trivago.
Hefer said there had been a 50 per cent decline in searches for domestic and international travel in Austria, and a 35 per cent fall in the Netherlands, where the government has introduced new restrictions on bars, restaurants and non-essential shops.
Room occupancy in Amsterdam has fallen from 62 per cent in the last week of October to 41 per cent this week, and there have also been declines in Vienna and Munich, according to figures from STR, a hospitality data provider.
There has been a fall in search interest for hotels in Austria, the Netherlands, Belgium, and Germany, according to Expedia, the online travel booking company.
While the disruption is a blow for companies still recovering from the damage inflicted earlier in the pandemic, the situation is still far better than before vaccines allowed the reopening of travel earlier this year. November is typically a quieter month for the industry, and airlines were still planning to raise capacity again going into the busier Christmas season, OAG said. Searches for flights so far this month have been 80 per cent higher than in the same month last year, according to travel bookings company Amadeus. Mark Simpson, an aviation analyst at Goodbody, said the current difficulties for airlines should not detract from the long-term recovery picture. “Nobody is buying the sector for Christmas prospects, they are buying for summer 2022 and 2023,” he said. “Airline stocks have de-rated as though they are facing last year’s risk, but I don’t see that. You have to keep the faith in what’s going to be some tough months to come.”
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