IAG weighs legal challenge against UK travel quarantine measures
The British Airways owner is considering legal action against the UK government’s planned 14-day quarantine for travellers coming into the country.
International Consolidated Airlines Group (IAG) shares are up 8% on Friday, with the stock soaring after the company said it is considering legal action against the UK government’s planned 14-day quarantine for travellers entering the country.
Low-cost rival airline Ryanair said that it would support any legal action against the quarantine plans, with IAG CEO Willie Walsh telling Sky News that the company is reviewing the situation with its lawyers.
IAG is trading at 313p per share at the time of publication, with the stock down 50% year-to-date.
Quarantine plans threaten stability of travel industry
The 14-day quarantine measures are due to take effect on 8 June and have received strong resistance from the travel industry which has been acutely impacted by the coronavirus pandemic.
Airlines plan to return to the skies in July, albeit at a lower capacity than before the crisis, but the industry has taken umbrage with the quarantine measures which they believe will deter passengers from travelling.
IAG and other airlines have been burning through cash reserves just to stand still, with the British Airways owner spending around £178 million a week.
‘I wrote to MPs last night to say the measures have torpedoed our opportunity to get flying in July. We think it is irrational, disproportionate and we are giving consideration to a legal challenge to this legislation. We are reviewing that with the lawyers later on today,’ Walsh told Sky News.
‘I suspect there are other airlines that are doing so because there was no consultation with the industry prior to enacting this legislation and we do believe it is an irrational piece of legislation.’
IAG: technical analysis
Despite an eruption of controversy over its job reduction efforts and the potential impact on its coveted landing slots, IAG has been on a tear lately.
The price has gone from 160p in mid-May to over 300p, playing catch-up with indices in impressive fashion. In part this is sector-driven. Airlines found little upside in the early part of the market rebound in March and April, as investors fretted about passenger demand remaining at rock-bottom levels for an extended period.
But as signs of a recovery grow, and airlines talk about restarting large-scale flight operations much sooner than expected, the sector has seen plenty of inflows. IAG has been no exception to this, and has been a big winner since the middle of last month.
From a technical perspective, the price has succeeded in rallying through the early April peak around 260p, according to Chris Beauchamp, chief market analyst at IG.
‘From there it has gone firmly into rally mode, surging towards the gap down from mid-March, with a zone of possible resistance around 315p,’ Beauchamp said.
‘If it can clear this then the next target becomes the declining 100-day SMA (currently 371p), and then on to the much bigger gap just below 400p.’
‘Short-term trendline support comes into view around 300p, while below this the price may retreat towards trendline support from the May low, which points towards a rally from 270p,’ he added.
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