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  • May 04, 2020 03:13 PM AEST
  • Team Kalkine

Summary

  • There are certain sectors which have been severely impacted by Covid-19 and are vulnerable to any second wave
  • Aviation, travel, tourism and leisure and the hospitality sector have been significantly hit by the crisis
  • The trade body of the UK Hospitality expects the sales across the sector to be 56 per cent lower than last year
  • The British aviation industry is one of the worst affected sectors by the unprecedented crisis arising due to the Coronavirus infections
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The impact of Covid-19 Pandemic has been destructive. It has not only taken a toll on people's health and lives but also hampered the businesses and employment as well, resulting in a slowdown of the economy. The British economy has seen the business activities contracting and the fiscal deficit increasing. There are specific industries which have been significantly hit by the crisis, such as the aviation industry, the travel, tourism and leisure and the hospitality sector.

If the people do not follow the preventive measures carefully and diligently, they are not far from facing the second spike of the dangerous Coronavirus. In case the market undergoes such a situation again, the stocks of the above-mentioned industries will be in severe financial stress facing the risk of collapsing.

Hospitality Sector

The UK has been in lockdown since 23 March, but with the decline in the number of cases and deaths recorded due to the novel Coronavirus, decisions were taken by the British Government to re-open the hospitality sector from 4 July 2020 and bring the economy back to normal. This industry comprises of 700 companies, employing 3.2 million people. It contributes 5 per cent to the Gross Domestic Products (GDP) of the United Kingdom, 10 per cent to the employment and 6 per cent to the businesses.

The trade body of the UK Hospitality expects the sales across the sector to be 56 per cent lower than last year (2019), reducing revenues by £73.4 billion, and 50 per cent of the businesses are expected to reach only breakeven towards the end of 2021. It reflects the urgent need for support to prevent further business failures and to safeguard millions of valuable jobs.

Stock Performance

Loungers PLC (LON: LGRS) is a cafe and restaurant company operating in the UK. The stocks of the company ended at GBX 118.50 on 10 July 2020, down by 0.84 per cent. The 52-week low price of the stock was GBX 77.50, and the 52-week high price was GBX 269.00. The market cap of the company was reported at £122.37 million, while it has given a negative return of 43.84 per cent on a year to date basis.

Fuller, Smith and Turner PLC (LON: FSTA) is a pub and hotel company headquartered in London, United Kingdom. The stocks of the company ended at GBX 716.00 on 10 July 2020, down by 0.56 per cent. The 52-week low price of the stock was GBX 610.00, and the 52-week high price was GBX 1,230.00. The market cap of the company was reported at £ 232.85 million, while it has given a negative return of 25.42 per cent on a year to date basis.

Aviation Industry

According to the International Air Transport Association (IATA), the total employment provided by the airlines will decline to 1.9 million in 2020 globally. A total of 32 million jobs supported by the aviation industry (including tourism) are at risk. The air transport supports 1.56 million jobs and GBP 88.8 billion of gross value to GDP, accounting for 4.5 per cent of UK GDP.

The British aviation industry is one of the worst affected sectors by the unprecedented crisis arising due to the Coronavirus infections, disrupting its operations almost completely. The passenger airline segment is the most affected, of all the sections of the airline sector. Airline companies have been forced to ground hundreds of aircraft and are allowed to run with a minimum capacity to overcome the financial impacts of the pandemic.

Recently, on 30 June 2020, Airbus announced its plans to cut a total of 15,000 jobs out of which 1,700 belongs to the UK. Similarly, EasyJet, Ryanair and Rolls Royce have also been facing the effects of the crisis.

To know more, do read: https://kalkinemedia.com/uk/news/covid-19-impact-economic-downturn-of-the-aviation-industry

Stock Performance

Ryanair Holdings PLC (LON: RYA) is a passenger airline company operating in Ireland, Continental Europe, Morocco, Israel and the United Kingdom. The stocks of the company ended at GBX 10.46 on 10 July 2020, up by 1.50 per cent. The 52-week low price of the stock was GBX 8.14, and the 52-week high price was GBX 16.10. The market cap of the company was reported at £10,050.96 million, while it has given a negative return of 29.95 per cent on a year to date basis.

EasyJet PLC (LON: EZJ) is a UK based airline company operating low-fare aircraft. The stocks of the company ended at GBX 664.00 on 10 July 2020, up by 1.72 per cent. The 52-week low price of the stock was GBX 475.00, and the 52-week high price was GBX 1,552. The market cap of the company was reported at £2,852.01 million, while it has given a negative return of 53.57 per cent on a year to date basis.

Travel and Leisure Industry

Tourism is one of the main factors that can lead to the transmission of Covid-19 disease. It has been a stimulant as well as a victim of the pandemic. That's the reason the tourism sector has been among the worst-hit areas by the Covid-19 epidemic. The outbreak of Coronavirus and the lockdown which followed across various countries of the world has brought the industry to a standstill. With this, all the subsidiary industries, such as airlines, restaurants, hotels, tours and travels, etc. been badly hit.

Stock Performance

TUI AG (LON: TUI) is an integrated tourism company based in Germany, providing services through hotels and resorts, cruises, etc. The stocks of the company ended at GBX 365.90 on 10 July 2020, up by 1.53 per cent. The 52-week low price of the stock was GBX 254.00, and the 52-week high price was GBX 1,081.50. The market cap of the company was reported at £2,122.83 million, while it has given a negative return of 63.09 per cent on a year to date basis.

Carnival PLC (LON: CCL) is a leisure travel company providing vacation to cruise destinations. The stocks of the company ended at GBX 986.00 on 10 July 2020, up by 4.45 per cent. The 52-week low price of the stock was GBX 605.00, and the 52-week high price was GBX 3,895.00. The market cap of the company was reported at £1,723.49 million, while it has given a negative return of 72.97 per cent on a year to date basis.

Conclusion

It is expected that with the Government aids being provided to different industries, the nation’s economy would revive. Though, it is hoped that resuming the operations may not bring in another wave of infections in the country and derail the economy once again. If the United Kingdom faces the increase in the infection rate again, it could turn detrimental for some to the highly vulnerable segments.

 


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