EasyJet’s (LON: EZJ) shares tumble 6.62% on Covid-19 woes

Ahead of its third quarter results on 20 July, EasyJet’s (LON:EZJ) share price fell 6.62 per cent on 19 July as pandemic fears rattled the UK stock market. The shares of the aviation company have a one-year return of 16.13 per cent, however they are trading 29.68 per cent lower than the 52-week high reached on 7 May 2021. The shares closed at GBX 770 on 19 July.

For the six months ending 31 March 2021, company’s passenger numbers fell 89.4 per cent to 4.1 million compared to 38.6 million in the same period a year ago. Its total revenue fell 90 per cent to £240 million compared to £2,382 million a year ago. Passenger revenue decreased 91 per cent to £170 million while ancillary revenue fell 87 per cent to £70 million.

Why are the markets jittery?

Stock markets all over the world had a bad day on 19 July. Global indices continued to trend lower because of the combined threats of high inflation, high commodity prices, and a resurgence of Covid-19. The worst hit was travel and tourism-related shares.

Carnival Plc fell 8.27 per cent and International Consolidated Airlines Group, which owns British Airways, was down 5.23 per cent.

In February, EasyJet’s share price reached 1,508.5 pence. But as European air corridors shut down due to travel restrictions, the stock fell to 475p in March. Its results for the first half of the year could not do much to lift sentiments, as the company was badly hit by the economic fallout of the Covid-19 pandemic.

Add to its woes, despite the economy opening up, the government’s restricted overseas travel sanctions have also hit the company’s reopening plans. The popular Balearic Islands was moved to the amber list, where those not fully vaccinated would have to quarantine for 10 days on return from the earlier green list that has no quarantine requirements.  Several popular tourist spots like Italy, Spain, and Greece continue to remain on the amber list.

EasyJet’s (LON: EZJ) flight to recovery

CEO Johan Lundgren has expressed dismay on the government allowing people to visit nightclubs without a mask but restricting travellers to visit Europe’s beaches where the infection rates are lower compared to that of the UK. The changing travel rules have also contributed largely to the aviation industry’s miseries, where, despite the economy opening up, the worst-hit sector has not been able to take full flight.

The uncertainty around increasing costs and demand is likely to have an impact on EasyJet’s third quarter trading update, dragging down its share price further. Some analysts forecast the company to report a pre-tax loss of £1.13 billion this year, and recovery would happen in 2022 with a profit of £195 million, followed by £505 million in 2023.