A global pandemic is a tough environment for any business. Lockdown closes off traditional sales channels and “normal” activity is put on hold. For travel companies, however, the pain is much more extreme as even the virtual route followed by some vendors is not viable. No one is going to pay an airline to show them a video of a beach.
Around the world, tour operators and airlines are dramatically drawing in their expenditure as trade volumes have collapsed. In March, the UK’s aviation industry saw its economic output fall by almost 50%, according to the Office of National Statistics. The picture for April and May is likely to be no better — and could be dramatically worse.
British Airways, Ryanair and other international carriers have already announced tens of thousands of job cuts between them, with Virgin and Lufthansa also asking for state aid, to get them through the current crisis.
But easyJet, which arguably led the charge into fast, cheap European travel seems to have additional woes to contend with.
Towards the end of May, the airline announced it had been the victim of a cyberhack, which had stolen the travel plans of thousands of its passengers. While no credit card or passport details were accessed, the company said, the event posed uncomfortable questions around its ability to withstand modern digital threats.
Shareholders may have already been reeling from the £60m paid in dividends to the founder – Stelios Haji-Ioannou – and his family as the size of the Covid-19 impact was coming into view, with another argument brewing between him and the company directors over a contract with Airbus to supply more than 100 new aircraft.
Since February – when global stock markets hit their heights – easyJet’s share price has more than halved, threatening to take it out of the FTSE100 index, which tracks the largest UK companies. This would also mean it is automatically sold by many investors choosing to commit their capital to just the largest (and therefore, supposedly robust) UK listed businesses.
However, despite these grumblings and specific issues, this slump is not too far out of line with indexes tracking all other global airline stocks.
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So, what does the future hold for the orange and white carrier, and the industry as a whole? Brits love a trip abroad, and being an island, there is no better escape route than air travel. So as Europe and Asia seem to be emerging out of lockdown, it could be up, up and away, at least for some, taking airline stocks with it!
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