Lufthansa, easyjet, sells as EU raises travel concessions

LONDON – Airline shares fell Friday after European governments announced further travel restrictions to combat rising Covid infection rates and highly contagious changes.

European leaders on Thursday agreed to keep their borders open just to encourage any unnecessary travel. This means that citizens who want to move from areas where the virus is circulating at a very high rate will be asked to test negative and go under quarantine when they reach another member state.

France has already said that Sunday will force citizens coming from other EU countries to have a negative PCR test 72 hours before they leave.

“We are convinced that we need to keep borders open for the domestic market to work, but at the same time we are convinced that restrictions should be put in place on unnecessary travel,” said Chief Executive. Council of Europe president Charles Michel, who chairs meetings among 27 EU leaders, said Thursday night.

These travel restrictions pose a challenge to the EU because of its free movement policy, where citizens, goods and services move freely from one country to another. However, this epidemic is compounded by the pandemic, which is then reflected in the performance of the travel sector.

IAG, owner of Iberia and British Airways, fell nearly 4% on Friday. Lufthansa also fell about 3%. Easyjet fell more than 4%.

The total travel and leisure sector in Europe was down 2.8% during European lunchtime trading hours.

Speaking to CNBC earlier in the week, Mark Manduca, a travel and leisure analyst at Citigroup, said any roadblocks, including test results, from the moment they leave the house to reach the country of negative destination to the region.

He said the recovery in the next 12 months would be somewhat “uneven.” Due to the travel restrictions, Manduca expects consumers to opt for longer and fewer vacations a year rather than frequent weekends.

Some European airlines, such as AirFrance and Lufthansa, have received government subsidies to deal with the blows from the pandemic. However, there are issues that will require further support in the coming months.

Lufthansa CEO Carsten Spohr said Thursday that the company is currently losing 1 million euros ($ 1.2 million) every two hours. However, this is a “huge improvement,” he said, given that at one point in 2020 the airline was losing the same amount of money per hour.

Earlier this month, the International Air Transport Association (IATA) said air passenger numbers came to a halt by the end of 2020.

Passenger traffic growth fell 70.3% year-on-year in November, the IATA said, with Europe “as the region most severely affected by strict restrictive measures.”

European leaders have begun debating whether vaccination certificates should be used to encourage travel in the coming months.

The idea, pushed by Greece and other heavy tourism countries, would allow vaccinated recipients to travel anywhere in the EU.

However, the 27 heads of state on Thursday decided to decide on so-called vaccine passports later.

“Instead of relaxing travel restrictions, the vaccine passport would simply create new frontiers across people and countries,” Alberto Alemanno, professor of EU law at the HEC business school, said by email.

“Because vaccine campaigns are spread very differently across Member States, some nationals are more likely to be vaccinated than others, because they are distinct regions and age groups over others, “he said.