Susannah Streeter, senior investment and markets analyst for Hargreaves Lansdown comments on the recovery in airline stocks..
‘’The lifting of travel restrictions for double jabbed visitors to the US provided the thrust needed to send the recovery in airline stocks full throttle. After months riding the stomach wrenching turbulence of rolling restrictions with red lights flashing on transatlantic travel, the industry is now set on a smoother ride to recovery ahead.
British Airways owner IAG was one of the biggest risers on the FTSE 100, climbing 11% as the prospects look brighter for a surge in bookings by UK and EU travellers. There was much needed respite for beleaguered easyJet which rose 4% and tour operator TUI, up 2.2% with expectations that winter sun holidays to destinations like Florida will see a surge in demand.
Rolls Royce also caught a ride higher given that its core business of making and servicing engines for long-haul aircraft, is based on the number of hours its engines are in the air. The journey back to health has also taken a big step forwards for Ritazza and Upper Crust owner SSP in the FTSE 250 which rose 5.8%.
The company, which runs concessions across 180 airports, relies on the travelling public to pick up snacks and treats on journeys, and there are high hopes the hustle and bustle will return at its outlets dotted across the transport network now.
The travel sector may be flying into brighter skies, helping the FTSE 100 claw back some losses, but still nervousness hangs over the financial markets, with inflation worries nagging investors, particularly with gas prices sky high. Concerns are also mounting that problems are piling up in the Chinese economy due to the precariousness of Evergrande, the property conglomerate. Shares in the company have sunk yet again, and there are now fears that it defaults on its huge debts, there could be contagion, spreading right across the financial system. There may be pockets of recovery right now, as COVID restrictions ease, but it’s feared the global economy could now be hit by a fresh barrage of problems.’’