The UK Government’s decision to shorten its travel destination ‘green list’ saw a sharp decline in share prices as the market will need to adjust-down forecasts for this year and raise cash needs for the air travel industry. The universally negative response is not surprising given the downgrading of Portugal from green to amber after only three weeks, with the country being the only real summer holiday destination previously on the green list for UK travellers.
This ‘stop, go, stop’ decision making by the UK Government makes scheduling future capacity almost impossible for airlines, with all the cost implications this has in terms of readying aircraft and staff for deployment and then having to stand them down again. Further, it will undermine customers’ confidence in making bookings, given the uncertainty that the status of any destination could change while they are abroad. As a result, we would expect the booking window to tighten again as a result of the decision made to change Portugal’s status to amber.
Potentially we might see a further round of funding made available, such as the CCFF scheme accessed last year (the Bank of England’s Covid Corporate Financing Facility), although the industry would prefer the loosening of travel restrictions as the answer to this concern.
Overall, progress to recovery was never going to be a straight line, with the Delta variant proving to be a concern that is currently looking to lead to the delaying of a wider lowering of barriers by some three to four weeks. This is why a number of airlines were cautioning the market that losses this year may be bigger than consensus indicated at the time of their recent results.
About the author
Mark Simpson is an equity analyst at Goodbody, a specialist investment banking, wealth management and asset management firm.