LONDON (Alliance News) - Charles Stanley says investors could lighten holdings of travel and leisure stock if they want to take safety precautions against the impact of a wider spread of Ebola.
Stocks including easyJet, International Consolidated Airlines Group, Carnival, TUI Travel and Intercontinental Hotels Group have fallen Tuesday and Wednesday after Spain reported the first case of transmitted Ebola in Europe.
Charles Stanley compares the Ebola outbreak with the SARS outbreak in 2003, which hit airline stocks already depressed by the Iraq war and high oil prices. The SARS impact included passenger traffic declines of up to 40% on Far East and Asian routes.
The Ebola outbreak is clearly worse than SARS in terms of numbers, but it hasn't yet spread widely to Europe, the brokerage said, adding that airlines are in a far stronger position than in 2003 and should also benefit from lower fuel costs in 2015.
Charles Stanley analyst Tony Shepard notes that easyJet is probably most exposed to Ebola through its French network, because of that country's links to West Africa. For IAG, the risk is Iberia, which could be exposed if there is a downturn in the Spanish travel market.
"At this time we are not changing our recommendations on EasyJet (Hold) and IAG (Accumulate) but clearly operating risks have increased. Although Ebola has had no impact on the financial results
of the airlines to date, it is possible to envisage a situation where the disease gets out of
control. If investors want to take safety precautions they could lighten holdings," Shepard wrote in a note.
IAG shares are down 1.3% at 341.20 pence, easyJet down 1.6% at 1,367.00 pence, Carnival is down 1.7% at 2,289.19 pence, TUI Travel is down 2.3% at 373.20 pence and Intercontinental Hotels Group is down 1.2% at 2,218.00 pence.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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International Airlines (IAG)
easyJet (EZJ)