Will UK travel shares rally as investors hunt for bargains?

The economic turmoil caused by Covid-19 continues to wreak havoc on global markets, but can the UK travel industry  weather this latest storm?

It is clear that the travel industry is shaping up to be one of the hardest hit during the coronavirus pandemic. As national governments close borders and implement social distancing measures, the £655 billion global travel and tourism industry has virtually ground to a halt.

Air passenger traffic has dropped by as much as 95% between 1 March and 1 April in some areas, while some estimates calculate that up to 45% of hotel industry jobs have already been eliminated at the time of writing. Unsurprisingly, this has had a profound and unprecedented impact on the value of the largest travel and tourism companies listed on the FTSE 100.

Shares in Carnival Corp, the largest cruise operator in the world, dropped from £31.03 on 17 February to just £6.20 a month later. Likewise, airline giant easyJet saw its own share price fall from £15.09 to just £5.95 during the same period.

There is little indication that this industry will bounce back anytime soon, with some market pundits going so far as to claim that many of the major travel companies put on ice by coronavirus will never resume operations again once this is over. Nonetheless, significant numbers of investors are pouring into these beleaguered companies in the hope of snapping up a bargain, causing small but significant rallies in share price.

Bargain hunters boost travel shares

While the factors that have caused the value of FTSE-listed travels companies to sink have not dissipated and show no sign of doing so, a slight rally is underway.

On 8 April, Carnival saw its share price jump by over 30% as investors large and small, including Saudi Arabia's sovereign wealth fund, which took an 8.2% stake in the company, rushed in take advantage of low prices. On 14 April, Carnival CEO Arnold Donald told CNBC that cruise bookings for 2021 were 'strong' and that he was confident the company would bounce back quickly.

Likewise, easyJet saw its share price jump over 30% last week as investors and traders sparked a buying spree, fuelled in part by the company's securing of a £600 million 'coronavirus loan' from the UK government. However, this has been tempered by a large drop when markets opened this morning, which is largely related to easyJet's founder continuing to feud with the leadership team over the details of the company's rescue plans.

Meanwhile, investors have been snapping up huge amounts of shares in IAG, the holding company that owns British Airways, Iberia, and Aer Lingus, helping to drive its price up by around 22% over the course of the past week. All of this suggests that there is a strong consensus among certain investors that now is a good time to buy shares in travel companies.

Experts warn against rushing in

However, just because some investors are rushing into travel stocks does not necessarily mean that it is a good idea. By all measures, the short and long-term outlook for the global travel industry is particularly grim.

Financial experts recently spoke to the BBC about the phenomenon and warned that there was no indication that the travel industry had 'bottomed out' just yet, and that further nosedives are very much within the realm of possibility. In the longer term, it is also likely that some airlines may never actually recover, going bust as a result.

If air traffic continues to remain at current levels for several months, it is difficult to believe that even the largest airlines, which were already operating on thin margins, will have enough liquidity to tide them over. Carnival, as well as smaller UK travel companies like National Express, have completely exhausted all of their remaining credit and are desperately seeking further loans to stay afloat.

In addition, travel companies of the size and stature of easyJet and Carnival will be heavily dependent on government bailouts to see them through, with even easyJet's recent £600 million loan likely not being enough at the moment.

Whether these early investors will be vindicated depends heavily on how different countries and regions manage their response to the coronavirus, and how quickly the travel industry will be able to return to normal.

How to take a position on travel stocks

What do you think to a potential recovery for travel stocks? A long way off on the horizon, or taking off soon? Either way, you could back your judgement by going long or short with IG.

  1. Decide whether to go long (buy) or short (sell) the stock
  2. Create an IG account to trade on the SG’s best platform
  3. Search for the share in the search bar. For example, type ‘easyJet’ or ‘Carnival’
  4. Choose your position size
  5. Confirm your trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.