Travel stocks extend losses amid COVID-19 fears

Ella Castle

UK travel stocks are extending their losses for a second day as COVID-19 concerns continue to mount. While the FTSE 100 (^FTSE) has been gaining momentum overall, some players are still in the doldrums. British Airways and Iberia parent IAG (IAG.L) has been steadily declining all week, down 2.3% at […]

UK travel stocks are extending their losses for a second day as COVID-19 concerns continue to mount.

While the FTSE 100 (^FTSE) has been gaining momentum overall, some players are still in the doldrums.

British Airways and Iberia parent IAG (IAG.L) has been steadily declining all week, down 2.3% at around 1:30pm on Tuesday.

Shares in IAG have been down all week as travel concerns persist. Chart: Yahoo Finance UK

Similarly, engine maker Rolls-Royce has taken a further hit on Tuesday, with shares down 2.2%, reaching their lowest price for the month.

Rolls-Royce shares continue their losing streak. Chart: Yahoo Finance UK

“For the investors, it is a case of deja vu, with supermarkets and food delivery stocks on the rise at the expense of travel stocks,” said Joshua Mahony, senior market analyst at IG. “While the UK has been quick to impose quarantine restrictions on visitors from nations with rising COVID cases, the fear is that international travel will grind to a half in the event that nations begin to restrict travel for UK visitors.”

The European travel sector as a whole could face further headwinds.

“Anyone leading a business in the travel sector needs to be an optimist to motivate staff and encourage customers that they should still book holidays,” said Russ Mould, investment director at AJ Bell in a note about wider travel and leisure industry trends.

Although, government restrictions might make booking holidays more difficult.

UK prime minister Boris Johnson announced on Tuesday a string of new curbs on everyday life in England, warning they could last six months as the country struggles to contain rising coronavirus cases. These include guidelines for retail, tourism, leisure and other sectors that will become “legal obligations.”

Businesses who break COVID-19 rules will also risk fines, Johnson added.

READ MORE: Boris Johnson unveils new rules to combat coronavirus second wave

“The sun was shining on TUI and its travel peers in recent months as lockdown conditions eased, but now the clouds are gathering, and its party looks like it will be rained off,” said Mould.

TUI (TUI.L) said in a trading update on Tuesday that it plans to permanently reduce its overhead cost base by 30% amid its battle to survive during the pandemic.

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