European aviation faces turbulence ahead

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Shares in European airlines fell this week, as rising coronavirus cases on the continent of Europe accelerated doubts over the upcoming summer holiday season. British Airways owner IAG dropped 8%, holiday airline Jet2 fell 7%, easyJet was 5% lower, while low-cost carrier Ryanair slipped 3% at the close in London after recovering from steeper losses at the open. At one point in trading this week, British Airways owner IAG shares fell 16% – the most dramatic decline since the pandemic started.

The falls followed warnings from the UK government that a new wave of cases and lockdowns across large parts of continental Europe mean it is “too early to book summer holidays” threatening a key source of revenue for the region’s battered carriers. Airlines have reported surging bookings, albeit off a very low base, since the UK government set out a road map to reopening travel by mid-May – at the earliest. But that timeframe is now in doubt, and we expect more big European carriers will need new cash if this summer is a turbulent – with country restrictions and travel bans.

Airline stocks had rallied strongly this year as investors bet the sector would be one of the biggest beneficiaries of the reopening of major economies. IAG raised €1.2bn in a bond issue last week, which it said would help it survive a prolonged downturn in travel.The yield on IAG’s €500m bond set to mature in 2023 rose from 2.1% on Friday to 2.3% on Monday morning while the yield on easyJet’s €500m 2023 bond jumped from 0.8 to 0.97% as some investors sold their exposure to the airlines. The yield on Ryanair’s €850m bond set to mature in June rose from 0.3 to 0.5%. Meanwhile, the European Commission has unveiled plans for its digital health pass, being referred to as the “Digital Green Certificate” to facilitate safe free movement inside the EU during the Covid-19 pandemic. The Digital Green Certificate will be a proof that a person has been vaccinated against Covid-19, received a negative test result or recovered from Covid-19. It will be available, free of charge, in digital or paper format. It will include a QR code to ensure security and authenticity of the certificate. The Commission will build a gateway to ensure all certificates can be verified across the EU, and support member states in the technical implementation of certificates. They’ve informed us that member states remain responsible to decide which public health restrictions can be waived for travellers but will have to apply such waivers in the same way to travellers holding a Digital Green Certificate. But British officials have warned that Europe’s slow vaccine progress means travel to the EU this summer remains shrouded in uncertainty.

For the aviation sector, it’s widely accepted that the digital health passport for travel is on its way – it’s inevitable. Currently, the only disease that requires an official international certificate of vaccination is yellow fever. This is called the “yellow card”, or International Certificate of Vaccination and Prophylaxis, and is managed by the World Health Organisation (WHO). In a statement, The International Air Transport Association (IATA) said WHO is developing new standards that will make these certificates “vastly more secure and will dramatically reduce fraud” The IATA Travel Pass will be designed to accommodate these new standards. The Digital Green Certificate will cover three types of certificates – vaccination certificates, test certificates (NAAT/RT-PCR test or a rapid antigen test), and certificates for persons who have recovered from Covid-19. The certificates will be issued in a digital form or on paper. Both will have a QR code that contains necessary key information as well as a digital signature to make sure the certificate is authentic. Airports Council International (ACI EUROPE) announced that together with industry associations Airlines for Europe, Aerospace and Defence Industries Association of Europe, European Regions Airline Association, and International Air Transport Association, they see these certificates as an essential instrument to assist a safe and sufficient recovery of travel and tourism in Europe. They all request the EU Council and the European Parliament to approve the proposal of the Commission as soon as possible and for all EU States to start planning and implementation. “The onus is now on member states and the European Parliament to adopt this new initiative, and we urge them to take the necessary steps to implement it as a matter of urgency,” president and CEO of World Travel and Tourism Council Gloria Guevara said regarding the Commission’s work.

Source: Civil Aviation Authority – Qatar