bad26 Feb 2020 17:14
European travel and tourism stocks are being crushed by the coronavirus outbreak as investors bet trips for business and pleasure will be scaled back.
A benchmark tracking the sector is having its worst week since the 2008 financial crisis. And it’s only Wednesday.
Travel & leisure shares are turning out to be Europe’s biggest losers in the rout that’s ripping through equity markets as the virus spreads outside China to countries including Italy, Iran and South Korea. The sector gauge accelerated losses on Wednesday, down 3%.
“The longer this goes on the more inevitable it is likely to become that people postpone holidays and summer bookings,” Michael Hewson, chief market analyst at CMC Markets U.K. said by email. “Recent declines in these sectors show investors are worried about a significant impact on bookings and revenues.”
Travel shares have tumbled in the aftermath of cases being reported on the Spanish holiday island of Tenerife, and in Catalonia, Austria, Croatia and Switzerland, while incidents are on the rise in northern Italy, the focal point of the European outbreak. Latin America had its first case too and the U.S. is warning of the potential for infections at home.
The Stoxx 600 Travel & Leisure Index is down almost 12% since a Feb. 19 peak for the broader benchmark, which has fallen about 8% in the period.
European travel & leisure shares are worst hit in virus-fueled rout
CMC’s Hewson said he was planning on going to the U.S. in April “and I’m already thinking about whether I should delay it, until the outlook becomes clearer.”
Here’s a summary of some of the sub-sectors and stocks to watch.
Airlines
The first affected by the virus outbreak were flagship carriers exposed to travel to and from China, such as Air France-KLM and Deutsche Lufthansa AG, and British Airways parent IAG Group SA, as some long-haul routes to the country were halted. But short haul and discount carriers are also in the spotlight now that the virus is spreading in Europe.
Other airlines to watch include Ryanair Holdings Plc, EasyJet Plc and Wizz Air Holdings Plc, along with Turkish Airlines, which flies to 322 destinations, and Aegean Airlines in Greece could also be in focus.
“The current marking down of the airline sector is unlikely to reverse in the near-term as the virus spreads around the world and investors try to assess the impact for travel,” Goodbody said in a note on Wednesday.
Airport Operators
In terms of airports themselves, operators like France’s Aeroports de Paris, Germany’s Fraport AG and Austria’s Flughafen Wien AG have all seen their share prices fall by double-digit percentages this month.
Closely-held Heathrow Airport in London said Wednesday it’s “concerned about the global impact” but doesn’t expect a “material negative impact” on its financial results.
Travel Retail
SSP Group, which owns the Upper Crust chain of baguette stands at airports, dropped as much as 7% Wednesday after saying it will
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