Summer holiday hopes send travel stocks surging
British Airways owner IAG (IAG.L) and jet maker Rolls Royce (RR.L) were among the FTSE 100’s (^FTSE) top risers as UK prime minister Boris Johnson set out his long-awaited "roadmap" out of lockdown in parliament on Monday afternoon, causing travel stocks to soar. The travel industry is one of the worst-hit from the coronavirus pandemic.
The rules are not clear on when exactly both domestic and international travel will be allowed, but it does appear current strict restrictions will be eased. At the moment, only travel deemed absolutely necessary can be taken.
As per the government's website, everyone "must stay at home. You must not travel, including abroad, unless you have a legally permitted reason to do so. It is illegal to travel abroad for holidays and other leisure purposes."
Included in Johnson's four-step plan was to allow international travel potentially by 17 May, although not any earlier, and subject to review. This means Britons may start planning their summer holidays for later in the year.
IAG was up almost 7% by 4.30pm in the UK, while Rolls Royce gained 6.5%. The InterContinental Hotels Group (IHG.L) was also one of the top rises on the index, gaining 3.6%, as was Whitbread (WTB.L), owner of Premier Inn, which rose about 3.4%.
Budget airline EasyJet (EZJ.L) gained 7%, while rival Ryanair (RYA.L) rose 4.7% and Wizz Air (WIZZ.L) was up 6.7%.
Travel and tourism company TUI (TUI.L) surged almost 8%. Cruise-ship operator Carnival (CCL.L) also soared over 8%.
Johnson said that current restrictions on international leisure travel will only be eased after a review in April, led by transport secretary Grant Shapps. The market appears to be positive about the outcome of this review.
Earlier this month, Shapps had said foreign holidays will remain banned until “everybody” has had a coronavirus vaccine. His comments sparked an angry response from the travel industry.
Meanwhile domestic holidays will also be prohibited until April 12 at the earliest, which is when the second stage of the roadmap will kick in.
"Subject to any further diversions from the current course the government has set, the industry and investment interest around it is poised to perform well," noted Joe Morris, leisure partner at law firm, Gowling WLG.
"Staying on track with the plans in place now should ensure the industry strengthens and, vitally, evolves to meet the new needs of travellers in a post-lockdown environment," he added.
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Paul Charles, chief executive of travel consultancy The PC Agency, who co-founded the Save Our Summer campaign, said the announcement was “the news the travel sector really wanted.”
He said: “I’m sure virtually everyone in the travel sector will be pleased with the greater clarity and a timeframe of May for enabling those who’ve been vaccinated to travel overseas.
“By then, there will be over 16 million people eligible to travel abroad to see family, or for business or leisure, in a safe and responsible way," he added.
Current restrictions on travellers entering the country, which includes booking two COVID-19 tests to be done within their 10-day isolation period, and those coming from "red list" countries having to quarantine in hotels, will remain in place until mid-May.
Over the weekend, the UK travel industry called on the government to collaborate on a roadmap to recovery and provide tailored financial support.
An open letter, co-signed by firms such as TUI, easyJet and Airlines UK, followed calls from groups last week to relax restrictions ahead of the usually busy summer period.
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The letter said: "There has been little opportunity to recover or generate income since the virus first affected the sector 12 months ago, with government policies effectively shutting down international travel for most of the past year."
Last month the confirmed that arrivals from 22 countries will have to quarantine in hotels provided by the government. The travel industry had warned the move will have major implications for the UK economy.
Many of the countries on the list are South American nations, as well as South Africa and Portugal.
"In order to reduce the risk posed by UK nationals and residents returning home from these countries, I can announce that we will require all such arrivals who cannot be refused entry to isolate in government provided accommodation, such as hotels, for 10 days without exception,” Johnson had said.
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