UPDATE 2-UK quarantine move hits fragile airline recovery hopes

* UK-Spain quarantine hits airline recovery hopes

* Move dashes embattled sector's summer hopes

* IATA slams UK's 'stop-and-go' approach
(Adds comment, details, background)

By Laurence Frost

PARIS, July 27 (Reuters) - Britain's surprise move to
quarantine passengers arriving from Spain dealt a heavy blow to
European airlines already reeling from the coronavirus crisis -
and sowed new doubts about the prospects for a steady travel
recovery.

Airlines slammed what they characterized as a
disproportionate decision, as their shares sank across the board
amid fading hopes that an improvement in traffic could yet allow
them to salvage part of the critical summer season.

EasyJet shares were down 7.7% at 1500 GMT, with
British Airways parent IAG lost 6.1%, Lufthansa
5.3%, Air France-KLM 5% and Ryanair 4%.

Ryanair Group Chief Executive Michael O'Leary called
the UK measures "a badly managed over-reaction" as he unveiled a
185 million euro ($217 million) quarterly loss along with a more
downbeat recovery outlook.

While there was "no scientific basis for a national
restriction", O'Leary said he expected to see more COVID-19
"spikes and occasional restrictions continuing throughout the
summer and into the winter period".

Britain does not rule out restoring quarantine for arrivals
from other countries such as France and Germany, where it is
monitoring infection rates, a junior minister said.

The British measures follow new travel curbs or negative
advice from countries such as Norway and France, after an uptick
in infections in Catalonia and some other parts of Spain.

The British steps are more draconian as well as more
consequential, with UK-Spain flights accounting for 17% of
intra-European summer capacity, according to OAG data.

They also drew criticism from UK tourists now facing an
unplanned work absence. The government did not immediately
comment on a report in the Sun newspaper that officials were
already preparing to drop quarantine for arrivals from Spain's
Balearic and Canary islands.

The Spanish setback sent a chill through the travel sector,
prompting executives and analysts to review expectations for the
summer - normally a chance for airlines to lay down some fat to
survive the winter, when margins are thin at best.

"This is the season when you hope to make money," said
British aviation consultant James Halstead, who described the
quarantine measure as a "very strange" move. "It's going to be a
pretty tough operating environment for everybody."

The International Air Transport Association (IATA), the
airline industry's main global body, also said the British
decision "does not accurately reflect the risk of a regional
spike in one corner of the country".

Restoring confidence requires governments "working together
to isolate and precisely manage risks" rather than a
"stop-and-go" approach, IATA said.

"The UK's decision falls short of the mark."
(Reporting by Laurence Frost; Additional reporting by Conor
Humphries in Dublin, Sarah Yound in London and Tim Hepher in
Paris; Editing by Louise Heavens and Gareth Jones)