Last checked at 
* Airline outlook hit by new travel curbs
* Concerns mount for crucial summer
* New setbacks erase share gains
By Laurence Frost and Sarah Young
LONDON, Jan 26 (Reuters) - Recovery prospects for Europe's
coronavirus-stricken airlines are slipping from bad to worse, as
a British minister warned on Tuesday against booking summer
holidays and Germany mulled a drastic new clampdown on travel
even within the EU.
UK consumers should "absolutely" hold off from booking
holidays, said Nadhim Zahawi, the minister responsible for
vaccinations. "There's still 37,000 people in hospital with
COVID at the moment - it's far too early for us to even
speculate about the summer."
Airline shares, which had gained ground since November's
vaccine breakthroughs, have come under pressure this week amid
concern that new coronavirus variants and resulting lockdowns
now threaten the all-important summer season.
While major carriers have secured liquidity to survive the
slump for many more months, analysts say, the latest setbacks
mean some may need fresh funds to survive the following winter -
tough at the best of times - and weaker airlines may fail.
Mounting restrictions and testing demands threaten more
"stress and friction" throughout the summer, as well as "a more
truncated recovery in demand than investors currently envisage",
Citi analyst Mark Manduca warned in a note.
The travel outlook for the Easter break - this year falling
in early April - already seems almost hopeless.
German Chancellor Angela Merkel told party lawmakers on
Tuesday that "no tourist travel should be taking place", as her
government weighed tougher measures.
Throughout the crisis, governments have tried to maintain
travel links among EU and European Free Trade Association (EFTA)
states. Over the weekend, however, Sweden barred travel from
neighbour Norway in an attempt to stem the spread of new
COVID-19 variants, and Belgium banned non-essential travel.
Britain is also considering mandatory confinement in
"quarantine hotels" for some international arrivals, following
the example of some Asian countries.
Shares in UK-exposed easyJet and British Airways parent IAG
have both fallen 14% over five days amid the resurgent
gloom, wiping out some of their gains since November. Ryanair
has lost 6% in the same period.
And while aircraft manufacturers have been cushioned by
their large pre-crisis order books, some suppliers and engine
makers are feeling the heat.
Rolls-Royce further lowered its financial forecasts
on Tuesday, predicting a 2 billion-pound ($2.7 billion) cash
outflow this year as the collapse in flying hours hit so-called
power-by-the-hour contracts as well as maintenance.
British airlines and airports warned that further travel
restrictions would prove "catastrophic", calling for a bespoke
support package to help them survive the prolonged crisis.
The new curbs also threaten jobs and cargo shipments
including medical equipment, industry body Airlines UK said.
Airlines' key role in vaccine distribution is also helping
some to push back against restrictions affecting staff.
KLM, part of Air France-KLM, won a partial
reprieve from Dutch plans to require rapid COVID-19 tests of
returning crew, after warning of cargo disruption.
(Reporting by Laurence Frost in Paris and Sarah Young in
London. Editing by Mark Potter)
