Airline stocks and the new quarantine relaxations by the UK DoT

4 min read | August 05, 2021 01:40 AM AEST | By Abhijeet

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Airline stocks and the new quarantine relaxations by the UK DoT — Image source: Juice Flair, Shutterstock

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Summary

New quarantine relaxations by the Department for Transport permit fully vaccinated UK travellers to return from amber list countries without the need for mandatory quarantine.

Travellers from France will not be exempt from mandatory quarantine requirements.

The US continues to ban inbound non-American travellers amidst a spike in new infection rates.

New quarantine laws released by the Department for Transport (DoT) permit fully vaccinated UK travellers to return from amber list countries without the need for mandatory quarantine from August 2021. Mandatory quarantine laws have also been relaxed for vaccinated tourists hailing from the US and Europe. However, travellers will still be required to undergo a mandatory COVID test prior to departure and another test within two days of arrival.

The decision was implemented after airline operators such as British Airways and Virgin Atlantic disclosed the results of a pilot initiative that they said demonstrated that the vaccination status of travellers hailing from amber listed countries could be thoroughly and accurately verified from the borders.

No respite for France-based travellers

Relaxation of COVID-19 rules for European and American travellers was aimed at getting the country’s business back on track. The air link between New York and London and other key channels is reopening for vaccinated travellers and is crucial for tourism and business. However, the relaxation in quarantine laws will not apply to travellers from France and arrivals from the country would be required to follow mandatory isolation.

All eyes on tourism

The lifting of mandatory quarantine restrictions is expected to boost Britain inbound tourism and support jobs dependent on the country’s tourism sector. The decision was a sign of relief for several big and smaller aviation players that had to resort to job cuts during the pandemic to reduce losses and have been urging the government to unlock restrictions ever since.

Airline operators such as the owner of the British Airways, International Consolidated Airlines Group (LON: IAG), Ryanair (LON: RYA), EasyJet (LON: EZJ), and TUI (LON: TUI), engineering company Rolls-Royce (LON: RR.), and cruise operators such as Saga (LON:SAGA) and Carnival (LON: CCL) are expected to receive a boost with the change in quarantine law and resumption of operations. The changes in quarantine policies will boost the UK trade scenario as well as generate new tourist incomes. The inclination from the UK to loosen quarantine rules is expected to drive travel in Europe. Wizz Air (LON: WIZZ), a Hungary based budget airline operator, announced an expected rise in operating capacity to around 90 to 100 per cent of 2019 levels.

New York to London – A one-way ticket

Aviation companies are calling for the addition of more countries to the UK’s green destination countries and also requesting a revision of expensive mandatory testing requirements as per the new law. Some other airline operators, such as Virgin Atlantic, have offered to work in collaboration with the UK government to ensure smoother implementation of the new requirements aimed at supporting the reopening of the transatlantic corridor. However, the easing of restrictions could be a one-way ticket for American travellers, and aviation players are repealing the US’ ban on visitors from the UK. The United States Centers for Disease Control and Prevention (US CDC) issued its highest warning against travel to the UK amidst the spike in new Covid-19 infections. The US government confirmed no easing of strict border controls for non-Americans.

Aviation giants brace up for pre-covid level recovery

The lack of travel during the Covid-19 pandemic and subsequent restrictions imposed by governments across various countries hit the aviation industry hard. Although the sector is yet to recover, changes in isolation laws may offer much needed impetus for sector growth and recovery to pre-covid levels in the ensuing months. Therefore, it remains a sector that investors should keenly watch. Aviation stocks such as IAG, Wizz Air, EasyJet, TUI, and Ryanair are also expected to exhibit volatility associated with new changes and updates on the latest border restrictions. However, the macro scenario remains essentially unchanged, and most, if not, all aviation stocks are poised for recovery as travel restrictions ease and normalcy across major travel corridors is restored.

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