By Guy Taylor
Airline stocks tumbled this morning as investors fretted over rising oil prices and the extent the conflict in Israel will dent demand for travel in the Middle East.
Shares in British Airways owner IAG fell sharply, down just over 4 per cent in early trading and marking the second biggest faller on London’s FTSE 100 index, while Germany’s Lufthansa dipped by more than 3 per cent.
Low-cost carriers Wizz Air and Easyjet fell further, down 5.7 per cent and 5.2 per cent respectively.
Easyjet has halted all flights to Tel Aviv on Sunday and Monday, while changing the timings of its flights over the coming days.
Wizz Air announced yesterday it had suspended all flights to and from Tel Aviv until further notice. The budget carrier said yesterday: “We are continuing to monitor the situation closely and are in touch with the relevant authorities. The safety and security of our passengers and crew is our number one priority and all affected passengers will be contacted via email or text.”
Following Hamas’s attack, Israel’s Prime Minister Benjamin Netanyahu has declared that the country is “at war” with Hamas militants that rule the Gaza Strip, and has launched retaliatory air strikes.
Major benchmarks Brent Crude and WTI Crude are both up more than 3 per cent and rose to $87.55 and $85.94 a barrel respectively this morning.
The spike has prompted fears among investors that fuel prices, a major part of airlines’ cost base, could hit a slew of company’s bottom lines.
“Shares in IAG, the owner of British Airways, Wizz Air and easyJet were all down sharply in early trading, and cruise ship operator Carnival sagged too,” Russ Mould, investment director at investment platform AJ Bell, said.
“This was partly in response to a spike in oil prices, as fuel is a big part of the firms’ cost base even if they can and do hedge their future purchases to some degree, but also the result of wider fears over demand for travel should the Middle Eastern conflict last or even spread, and consumers decide to hold off from making fresh holiday plans.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said investors were nervous about the “repercussions of the conflict both in the short and longer term,” and particularly the prospect of it widening across the Middle East.
“Just as airlines had regained their pre-pandemic wings on a surge of pent-up demand, there is concern that people will be more nervous to take flights to destinations near the region.”
Streeter added: “Oil prices have also jumped up again, and although they still aren’t yet back at the recent highs reached at the end of September, there is also some nervousness creeping in about the volatile path of oil and inflationary pressures for airlines.”
