The travel industry is in “a tailspin”, says The Observer. While other sectors of the economy are opening back up, the government’s sudden imposition of quarantine measures on people returning from France, Malta and the Netherlands last week did more than wreck millions of holiday plans. It also puts at risk the hundreds of thousands of British jobs that depend on airports and travel operators.
Second-quarter figures from tour giant TUI provided a vivid illustration of the damage done to airlines by the pandemic. The Anglo-German business reported a 98% fall in revenue in the period, which coincided with lockdown, says Christopher Thompson on Breakingviews. Operating cash flow in the first nine months of TUI’s financial year hit “negative €2bn”. That has forced it to take loans from the German government. TUI can only pray that a surge in advance bookings for next summer means that 2021 will be a better year.
Who will be next?
This summer has been an introduction to “quarantine roulette”, says Alistair Osborne in The Times. Which destination will be banned next? Now investors can join travellers in trying to anticipate governments’ sanitary edicts by gambling on travel companies. TUI says a rights issue is “one option”, but few will be mad keen to buy into a share dilution at a business valued at £2bn but with debts of “€7bn if you strip out customer deposits”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Britons are rapidly concluding that the only sure path is to “stay at home in the rain”, says Nils Pratley in The Guardian. Ryanair doesn’t anticipate a speedy improvement – it has cut flight capacity for the coming months by 20%. The budget airline’s plan to operate at 70% of normal levels in September had always been a long shot; easyJet’s 40% target looks more appropriate for this pandemic-scarred summer. Ryanair can afford the misstep. A low cost base and a resilient balance sheet make it one of the stronger European airlines, says Philip Georgiadis in the Financial Times. At the end of June it had more than €3.9bn in cash.
EasyJet announced this week that it will close hubs at London Stansted, London Southend and Newcastle in response to reduced demand. The airline has taken on more debt to get through the crisis, but remains one of a handful of global carriers still boasting an investment-grade credit rating, says Lex in the same paper. Fare competition between the airlines has all but disappeared. Passengers have either decided to pay up to fly, or won’t go at any price. “Profitability” is “a long-haul destination”.
At least one carrier, however, is looking to the long term. Hungary-based Wizz Air plans to open a new base at Gatwick, aka easyJet’s “fortress”, says Simon Calder in the Independent. The initial expansion is modest, but Wizz Air’s UK boss Owain Jones says it is “a statement of intent”.
-
Starmer says Britain cannot ignore Russia threat – should you invest in defence?Defence stocks have been enjoying a winning streak since March. As Keir Starmer unveils Britain’s defence spending plan for the next decade, is it time to invest in defence?
-
How to manage a windfall: what to do with a £10,000 lump sumThe FCA has warned wealthy savers they have too much in cash, but beneficiaries of windfalls are still hugging safe havens and losing out
-
Investment opportunities in the world of Coca-ColaThere is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
Look to British stocks to lead the charge as the Magnificent Seven falterOpinion Gervais Williams, fund manager, The Diverse Income Trust, picks three British stocks where he'd put his money
-
'Pension funds shouldn't be pushed into private equity sector'Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throneGreg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn
