Travel Stocks Tanking Amid Renewed COVID Fears

By Duncan Ferris

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With a new and more transmissable COVID variant emerging in South Africa, travel stocks are taking a beating on Black Friday as investors fear the imposition of fresh travel restrictions.

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Travel stocks have taken a tumble in premarket trading amid concerns that a volatile new COVID variant could lead to the reimposition of pandemic restrictions.

In what seems a little like déjà vu, a new virus variant has been located in South Africa. Governments have scrambled to cancel incoming flights from the afflicted nations and restrict access for travellers from Southern Africa, but investors clearly fear the travel sector could be in for another difficult period.

Major US travel stocks which are in the red on Friday include:

  • Airbnb (NASDAQ: ABNB)

  • Delta Airlines (NYSE: DAL)

  • Southwest Airlines (NYSE: LUV)

  • Expedia Group (NASDAQ: EXPE)

  • American Airlines Group (NASDAQ: AAL)

  • Marriott International (NASDAQ: MAR)

  • Wyndham Hotels & Resorts (NYSE: WH)

Meanwhile, international travel stocks were struggling too. Below are some of the worst hit:

  • IAG (LSE: IAG)

  • Lufthansa (XTRA: LHA)

  • SSP Group (LSE: SSPG)

  • Air France-KLM (ENXTPA: AF)

  • RyanAir (LSE: RYA) 

Along with the drop in travel stocks, oil prices plummeted to a two-month low amid concern that new restrictions on movement could damage demand for fuel.

Photo by Ross Parmly on Unsplash

What is the outlook for travel stocks?

The bad news coming out of South Africa has come at a terrible time for travel stocks. Many had only just started showing a return to form. The likes of Delta, Airbnb and Expedia had all struck optimistic notes in recent earnings, stating that travel growth was returning.

For example, Expedia Group vice chairman and CEO, Peter Kern, said the company had seen “improvements across virtually all lines of business”.

He continued: “With early positive signs in Q4 and many countries announcing new openings to international travellers, we are feeling increasingly confident about a continued recovery.”

As such, the volatile new variant is clearly something of a sucker punch to the travel sector. It’s possible that, if the spread of the variant is not kept under control, restrictions could cause a similar shutdown to that seen in March 2020.

Some travel stocks, like online aggregator Expedia, saw their share price plummet by almost 50% in the initial wave of the pandemic. Similar scenes could be seen again. 

The new normal for travel stocks?

The new variant also brings into question how viable the travel sector can be in a post-COVID world. 

Between February and October 2020, 43 commercial airlines went out of business. That was just a single hit of COVID-19. If we now live in a world where new variants will regularly emerge to hamper travel, the industry will have to undergo a huge transformation or many more airlines and travel businesses will fall by the wayside.

Hopefully, the new variant is marshalled under control rapidly and causes minimal disruption. However, snapping up or holding on to travel stocks doesn’t seem like a smart idea right now.

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In this article:

Topics:
Travel
Travel Agencies
Oil
Industries:
Consumer Discretionary
Companies:
Airbnb
Delta Air Lines
Southwest Airlines
Expedia Group

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.