UK quarantine regime begins despite airlines opposition

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UK quarantine regime begins despite airlines opposition

 UK quarantine regime begins despite airlines opposition

Summary

  • Incoming travellers to self-isolate for two weeks in the United Kingdom
  • Three biggest airlines start legal proceedings against the Government
  • For Virgin Atlantic, number of air passengers not to return to pre-pandemic levels until 2023
  • With air bridges, there is light at the end of the tunnel

From today onwards, i.e. 8th June, incoming travellers must self-isolate for two weeks according to the new regime in the United Kingdom. At the port of entry, the travellers would be prompted for travel history and contact details such as address. If the travellers do not have a local address, they must self-isolate at dedicated locations identified by the government. They are not supposed to go out or use public transport. Any breach of guidelines could result in a fine up to £1,000 and other punishments. The quarantine period is fourteen days also known as the incubation period of the virus. This would mitigate the risk of spread of the virus from the people who are infected overseas.

As the UK has passed its peak of the novel coronavirus, the British government aims to keep the reproductive rate (R) less than 1, to hedge against the second wave of the pandemic. Just when UK seems to gather control, the incoming travellers are likely to pose a bigger threat as they might trigger a resurgence of this deadly virus.

This new regime would be hard on the travel and tourism sector, which is already struggling through these unprecedented times. The British government has requested to people to avoid non-essential travel. Already battling with refunds & cancellations amid coronavirus, the travel and tourism firms hoped to commence operations once the lockdown is eased. The new regime in place would deter the people from entering UK as they are already fearful and low in confidence. This regime would add to the woes of the sector.

Three British airlines have started legal proceedings in a bid to roll back the new regime against the British government. Easyjet Plc, Ryanair Holdings Plc, and International Consolidated Airlines Group (British Airways owner) believe the new regime to be detrimental for the sector. The British Airways termed the new regime to be irrational and disproportionate.

The pandemic has taken an incredible toll on the travel and tourism sector in the United Kingdom. The outbreak of deadly virus has impacted several sectors with travel being one of them. The lockdown was imposed to contain the spread of the pandemic. Due to travel restrictions being imposed, the travel and tourism businesses were severely impacted. In fact, this was one of the factors which led to a steep fall in oil prices. Travel & tourism sector has a significant contribution to the British economy.

Last month, Virgin Atlantic announced 3,000 job cuts in the UK. The airlines fear that the number of air passengers would not return to pre-pandemic levels until 2023. The airlines are currently struggling with maintenance cost of its fleet and parking charges.

Industry experts believe that the travellers might have to pay a lot more for tickets with new procedures introduced for flying. Social distancing measures are likely to be implemented, which means lesser people would fly. This would lead to lesser revenue per seat and would burn a hole in pocket for low cost air carriers. IATA, the global body for airlines, does not endorse keeping the middle seats empty. Another reason why practising social distancing on flight would not make sense because of the air conditioning system. These two reasons would certainly defeat the purpose of social distancing. However, it does supports use of face masks and PPE. One thing is for sure, that air travel is likely be a luxury once again.

However, it seems that there is some light at the end of tunnel. The British government is closely looking at dedicated travel corridors also known air bridges between neighbouring countries to allow seamless travel without any quarantine measures in place. The countries with lesser number of Covid-19 cases are likely to be a part of these travel corridors. The EU countries are also likely to follow suit and are already looking at air bridge option.

Many political leaders are endorsing air bridges between neighbouring countries, but there are details that need to be attended. Firstly, the new regime along with air bridges can stir a lot of confusion. Secondly, what if, while travelling there arises another wave of the pandemic and people get stuck. There should be more clarity on these pointers.

But one this is definitely crystal clear that the only way travel sector can survive is by recommencing operations. The government has already announced several packages for these businesses. Businesses on their part, need to patient and trust in the resurrection process. Let us discuss the stock performance of the airline carriers opposing the government.

  • International Consolidated Airlines Group (LON: IAG)

On a Year to Date (YTD) basis, the stock has delivered a negative price return of 48.52 per cent. On 8th June 2020, while writing at 10:31 AM, before the market close, International Consolidated Airlines Group’s shares were marginally up by 4.89 per cent against its previous day closing price; trading at GBX 343.50. There was enough liquidity in the stock as the volume hovered around 22,677,191 at the time of writing.

The stock's 52 weeks High and Low was GBX 671.00 /GBX 168.20. The stock was highly volatile in comparison to the benchmark index as the beta of the company stood at 1.94. International Consolidated Airlines Group’s market capitalisation stood at £ 6,504.69 million.

  • Ryanair Holdings Plc (LON: RYA)

The stock has delivered a negative price return of 13.67 per cent on a Year to Date (YTD) basis. Ryanair Holdings Plc’s shares were marginally up by 0.85 per cent against its previous day closing price; trading at EUR 13.00 on 8th June 2020, while writing at 10:37 AM, before the market close.

The stock has enough liquidity in terms of buyers and sellers as the volume was hovering around 393,732 at the time of writing. The stock's 52 weeks High and Low was EUR 16.10 /EUR 8.14. The stock was highly volatile in comparison to the benchmark index as the beta of the company stood at 1.31. Ryanair Holdings Plc’s market capitalisation stood at £ 12,478.91 million.

  • Easyjet Plc (LON: EZJ)

The stock has delivered a negative price return of 37.68 per cent on a Year to Date (YTD) basis. Easyjet Plc’s shares were marginally up by 4.08 per cent against its previous day closing price; trading at GBX 927.60 on 8th June 2020, while writing at 10:41 AM, before the market close.

The stock has enough liquidity in terms of buyers and sellers as the volume was hovering around 4,034,631 at the time of writing.

The stock's 52 weeks High and Low was GBX 1,552.00 /GBX 475.00. The stock was highly volatile in comparison to the benchmark index as the beta of the company stood at 1.82. Easyjet Plc’s market capitalisation stood at £ 3,539.92 million.

Comparative chart IAG, RYA, and EZJ

(Source: Thomson Reuters)

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