AUS
NZ
UK
CA
USA
IND
Summary
- EasyJet announced on 8 September 2020 that it will reduce the number of flights that have been currently operating after fresh quarantine measures were issued by the UK government
- BA has been in news recently for refusing to refund cash to its customers on cancellation of flight
- Amid the latest quarantine news, seven Greek islands have been removed from England’s list of destinations exempted from 14-day Covid-19 quarantine rule
Since the start of the Covid-19 crisis when the pandemic took hold, there have been mixed messages from the Government about travel restrictions in and out of the United Kingdom. Hence, the return of airline business to the industry looks very difficult anytime soon, as evident from the recent developments that have been taking place.
EasyJet to Cut Flights Due to Reduced Demand for Travel
The budget airline company of Britain, EasyJet has announced that it will reduce the number of flights that have been currently operating after fresh quarantine measures were issued by the UK government. This has resulted in lower consumer confidence and plunge in the demand for travel. It’s been only a month since the company had expanded its flight schedule to 1,000 flights per day after the demand rose to levels which was better than expected. As per the reports, EasyJet is planning to fly slightly less than the 40 per cent of the planned capacity in the fourth quarter of 2020. The flight schedule is likely to decline by 2 per cent.
The airline is still carrying out its operations to destinations which are excluded from the travel corridor list, including countries like Spain, Malta and France. However, package holidays of EasyJet to France remain cancelled. Customers are entitled to a full refund, if the flight is cancelled by EasyJet or can switch to another flight for free. One can cancel his/her holiday with no fees, if the departure date is more than 28 days away.
Widening of Quarantine Restrictions
With countries experiencing an increase in the Covid-19 cases, it has triggered the British Government to introduce fresh quarantine restrictions on travellers. Amid the latest quarantine news, seven Greek islands have been removed from England’s list of destinations exempted from 14-day Covid-19 quarantine rule. On arrival from the Greek islands (the islands of Lesbos, Tinos, Serifos, Mykonos, Crete, Santorini and Zakynthos, known as Zante), travellers will have to isolate themselves for two weeks on their return to England, as announced by the transport secretary, Grant Shapps.
British Airways Cash Refunds Stand-Off
British Airways (BA), UK’s flag carrier and an airline owned by IEG has been in news recently for refusing to refund cash to its customers on cancellation of flight. The company says it has always provided a refund if a customer is eligible. According to the EU law, when a flight is cancelled passengers are entitled to their money back within seven days. Recently, there have been few instances when the passengers faced difficulty in getting their money back. Earlier, the airline used to offer an online facility to the passengers who could request money back for cancelled flights. But after thousands of flights were cancelled due to the Covid-19 pandemic, that option was removed from the company's website.
Other factor determining the performance of the airline operator, IAG, the owner of BA was IAG shareholders backing $3.3 billion rights issue as Willie Walsh steps down.
Willie Walsh, who created IAG in 2011 with the acquisition of Iberia by British Airways, had been the CEO of the company for a long time. He handed over his duties and position to Luis Gallego. In a meeting held on 8 September 2020, shareholders approved to raise 2.75 billion euros ($3.25 billion) rights issue backed by the top investor Qatar Airways. The increase in shares was necessary for the capital appreciation, which was backed by more than 99 per cent of votes. Walsh had cut costs and increased liquidity, led by the planned rights issue.
Changes in the travel measures have impacted the demand and are likely to impact the airline stocks. Let’s have a look at some of the some of their performances:
EasyJet PLC
Easyjet is a British airline company that operates low cost European airlines. It resumed its services from 15 June 2020, after being in lockdown for three months. As per the Q3 trading update for the period ending 30 June 2020, the company carried 117,000 passengers with a total capacity of 132,000 seats in the remaining two weeks of the quarter.
(Source: Company’s Filing, LSE)
Stock Performance
EasyJet PLC (LON:EZJ) stocks traded at GBX 569.00 on 9 September 2020 at 10:48 AM, down by 4.75 per cent from its previous close of GBX 597.40. The 52-week low/high price was reported to be GBX 475.00/1,552.00. It had a market capitalisation (Mcap) of £2,728.62 million. The company recorded a negative return on price which was 58.22 per cent on YTD (Year to Date) basis.
International Consolidated Airlines Group PLC
IAG is a London-headquartered airline holding company, featuring amongst the world’s largest airline holding companies. As per the half-yearly result update for the period ending 30 June 2020, passenger capacity operated in Q2 was down 95.3 per cent on 2019, and for the six months down 56.2 per cent on 2019.
Stock Performance
International Consolidated Airlines Group PLC (LON:IAG) stocks traded at GBX 201.60 on 9 September 2020 at 11:03 AM, down by 3.03 per cent from its previous close of GBX 207.80. The 52-week low/high price was reported to be GBX 163.85/671.00. It had a market capitalisation (Mcap) of £4,127.49 million. The company recorded a negative return on price which was 67.34 per cent on YTD (Year to Date) basis.
To sum up, it is expected that with Government announcing widening of quarantine rule, the travel and tourism industry will continue witnessing a drop in the number of customers. Revival does not look any time soon.
