Travel stocks took a hit Tuesday morning as the industry continues to be disappointed with the government's traffic light system which will kick in when international travel opens up next week.
British Airways parent IAG (IAG.L) was down 5% by mid-morning in London and was among the FTSE 100's (^FTSE) top fallers. Jet maker Rolls Royce (RR.L) and InterContinental Hotels Group (IHG.L) were also among the top fallers, down 4% and 3.2% respectively.
EasyJet (EZJ.L), whose CEO recently said he wanted all European countries to be on the 'green list', saw its shares slump 3.2%. Rival budget airline Ryanair (RYA.L) fell roughly 3% and Wizz Air (WIZZ.L) was trading 4.5% lower.
The UK has introduced a system for travel whereby countries are divided into green, amber and red.
From 17 May, Britons traveling to green list nations don’t need to quarantine when they return to the UK unless the COVID-19 test they take on or before day two after their return is positive. In contrast, those who return from red list countries must pay £1,075 ($1,519) and quarantine in a hotel.
Those coming back from amber nations must quarantine at home. It is also illegal to travel to these places for leisure.
So far, there are only 12 countries marked ‘green’, including Portugal, Iceland and Australia. The list will be reviewed and possibly more countries added next month.
"There is not only disappointment surrounding the limited flight path out of travel restrictions, with countries given the green light as holiday destinations few and far between, but there also appears to be fresh concern about the impact of new COVID strains emerging which could knock confidence again in the travelling public," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
She said there is major worry around the World Health Organisation classifying the variant first identified in India last year as one of global concern with some initial studies showing it spreads more easily.
"The worry is that new mutations could weaken the effectiveness of vaccines and lead to fresh travel restrictions in economies which have bounced back from what was hoped to be the worst of the pandemic," she said.
"With infection rates still not under control in parts of the world, recovery in long haul travel appears even further way. That is having an impact not just on airline groups like IAG and easyJet but also aircraft engine manufacturer Rolls Royce given that demand is expected to stay subdued."
Earlier today Heathrow’s chief said the UK government should significantly expand the list of countries that are on the ‘green list’ where passengers can travel freely, as it continues to take a hit from the pandemic.
The airport group also said fully vaccinated people should be allowed to travel without any restrictions.
The travel stock moves come as the FTSE 100 moved 2% lower Tuesday morning despite prime minister Boris Johnson's announcement that the UK would move to further ease coronavirus restrictions.
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