International Airlines Share News (IAG)

(Sharecast News) - Travel stocks came under intense pressure on Monday as Germany pushed the European Union to designate the UK a "country of concern" and introduce strict quarantine measures for British travellers.

German chancellor Angela Merkel is understood to be pushing the proposal, which will apply regardless of whether or not travellers have been fully vaccinated, because the Delta variant is now so widespread in the UK.

European officials will discuss the proposal this week.

A government source insisted to The Times that Merkel was "increasingly isolated" among EU leaders on the matter. Prime minister Boris Johnson is expected to discuss the issue with her when they met at Chequers next week.

However, that did not stop British travel stocks from falling heavily on Monday morning.

As at 1100 BST, British Airways-owner International Consolidated Airlines Group was the second-heaviest blue chip faller, off 4% at 179.97p. Whitbread, which owns hotels in Germany, was down nearly 3% and InterContinental Hotels Group was off 2%.

Outside of the FTSE 100, TUI was trading 3% lower at 393.95p, easyJet was off 3%, cruise ship operator Carnival had lost 2% and fellow budget airline Wizz Air Holdings was down 3%.

Rolls Royce Holdings, which delivers and services the wide body aircraft engines used in long-haul flights, was also under pressure, off 2% at 104.1p.

The UK government is looking to operate a traffic light system for overseas travel this summer. Last week it announced several destinations, including Malta, the Balearics and Madeira, would be placed on a green list from 30 June.

Travellers returning from green list countries do not have to isolate.

The government also wants to allow fully-vaccinated travellers to be able visit amber list countries without having to isolate upon their return, but the plan faces significant issues, including how unvaccinated children will be affected and how best to check vaccination status.

Other countries also have their own rules. Portugal is on the amber list, meaning travellers must already isolate for ten days upon returning to the UK. And on Monday, Portugal announced that all British travellers must quarantine for 14 days upon arrival there, unless they can prove they have been fully vaccinated for at least two weeks.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Optimism on the horizon for the travel industry has once again been obscured by dark clouds as, one by one, European countries bring back tough quarantine rules.

"The ever-changing rules and restrictions mean that trying to plan an overseas holiday has become like a game of snakes and ladders. A relaxation of the rules by one country is swiftly followed by the tightening in another.

"It's yet another severe bout of turbulence for the airlines, which have already been rocked by the biggest crisis in their history. They have been haemorrhaging cash despite paring costs to the bone."

Joshua Mahony, senior market analyst at IG, said: "Airlines are on the back foot once again, with the recent expansion of the green list doing little to lift sentiment. Instead, investors are worried on the implications of the recent rise in Covid cases.

"The Delta variant has already reached mainland Europe, yet the growth in cases in the UK does raise the possibility that more nations will restrict travel for any visitors coming from here. Merkel is one of the proponents behind the idea that mainland European should raise restrictions on UK travellers, with such a move - coupled with [new health secretary Sajid] Javid's aim to remove restrictions in July - bringing a major risk that the airlines experience yet another lost summer."