Wednesday, January 19

Airlines fail South Africa travel bans linked to variant


Airline stocks have fallen the most since the early days of the Covid-19 pandemic, after European countries banned flights from South Africa to slow the spread of an emerging virus strain.

The UK will stop flights from South Africa and several neighboring countries for two days, requiring a 10-day hotel quarantine for those arriving from Sunday. Germany said on Friday it would only allow airlines to transport German residents back to the country, while European Commission President Ursula von der Leyen proposed an “emergency brake” on air travel from South Africa.

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The Bloomberg EMEA Airlines Index plunged as much as 12%, the biggest drop since March 2020. British Airways parent IAG SA was down 11% at 9:08 am in London, while Deutsche Lufthansa AG, Ryanair Holdings Plc and Air France-KLM recorded drops of similar magnitude.

The drastic measures at the border mark a new blow for the airline industry whose recovery has been stalled this month by a fourth wave of coronavirus cases that prompted new closures in Europe. Restrictions in Austria and elsewhere have clouded popular ski getaways, while reducing enthusiasm for year-end holiday travel, according to Ryanair CEO Michael O’Leary.

“This is the worst early Christmas gift the airline industry could think of,” said Nick Cunningham, an analyst at Agency Partners in London. “To quote Yogi Berra, this is déjà vu again.”

The emerging virus strain first identified in South Africa has alarmed health officials around the world, suggesting that more countries could close borders. Israel and Singapore have also restricted access, while the EU’s “emergency brake” allows EU member countries to act quickly to limit risks.

Stunted recovery

Airlines, one of the industries hardest hit by the Covid-19 pandemic, have been slowly regaining capacity since June, with a focus on shorter regional flights as countries began to lift border restrictions.

Long-distance travel also got a boost when the United States reopened its borders to European and other visitors this month, but that progress was already beginning to wane.

Winter blues

Carriers had also started bringing flights back to countries like South Africa, a popular winter sun destination. British Airways was scheduled to restart daily services to Johannesburg in mid-December, while increasing flights to Cape Town.

“We are working on plans for our customers and colleagues who are currently in South Africa and those who will be traveling from the UK in the coming days,” British Airways said in an emailed statement.

Neighbors Botswana, Eswatini, Lesotho, Namibia and Zimbabwe were also included in the so-called red list, with a two-day flight ban starting at noon on Friday. After Sunday, arriving travelers are subject to a costly 10-day hotel quarantine.

The measures mark the biggest change to the UK’s Covid travel rules since the so-called traffic light system was overhauled in early autumn to make border crossings easier.

Sudden change

Virgin Atlantic Airways had a London-bound flight in the air from Johannesburg when news of the red list arrived late Thursday, a spokeswoman said. Authorities instructed people leaving the night flight to isolate themselves, a spokeswoman said.

The planned relaunch of Virgin Atlantic flights to Cape Town on December 17 is likely to be suspended, the spokeswoman said. Services to Johannesburg were daily on 8 November and links are likely to be maintained to allow Brits to fly home, albeit under strict quarantine conditions upon arrival.

Between 500 and 700 people arrive daily in the UK via South Africa on flights, a number that is normally expected to increase over the next four to six weeks due to seasonal travel.

The real test for airlines will come after the generally slow winter months, according to Davy analyst Stephen Furlong.

“Airlines, in general, have excess liquidity and will endure the winter period,” he said. “The key will be the reserve profile in early 2022 for the 2022 summer season, actually Easter onwards.”

© 2021 Bloomberg


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