The value of London listed airline stocks dropped by almost £700m on Monday, as the family holidays were put in doubt due to wildfires and heatwaves gripping Europe.
Easyjet, British Airways owner IAG, TUI and Wizz Air shares fell as Greek authorities increased tourist evacuations of the popular holiday islands of Rhodes, Corfu and other resort islands where fires had swept the countryside.
Wizz Air lost 6.3pc. Easyjet finished 4.7pc down and Jet2 was 4.4pc. TUI and IAG both closed lower by 3.4pc, and 1.8pc.
Terminal data shows that the London-listed travel stocks collectively lost £694m.
EasyJet Jet2 and TUI are among the companies that confirmed they would be sending British tourists back to Greece by Monday.
Alex Macheras is an independent aviation analyst. He said that extreme weather conditions are becoming another risk for airlines to consider each summer. Strikes also affect air traffic control and the Ukraine conflict still impacts some flight routes.
He said: “Air travel can be affected by a wide range of factors, including security threats, weather-related and climate-related problems and geopolitical concerns.
“Unfortunately, the wildfires and heatwaves are just one more thing to add to a long list of problems.”
Investors were also alarmed by the wildfires and a warning issued by budget airline Ryanair, that air fare demand could fall as households struggle to pay for soaring mortgage payments.
The Irish carrier has also cut its forecast for full-year passenger growth to 183.5 millions, down from the previous guidance of 185 million. It blames delays in deliveries new Boeing aircraft.
Ryanair has warned that the demand for last minute bookings weakened between late June and early in July. Budget airline Ryanair said that it may need to lower its fares to increase take-up this winter as rising interest rates are putting pressure on household budgets.
Neil Sorahan is the airline’s chief financial officer. He said that during previous slowdowns, people did not stop traveling, but they became more price-conscious.
The question is: Do we need to increase the price or not? I’m not sure if we will need to do this in the winter or not.
Ryanair shares fell 6pc on the weak outlook in Dublin.
The airline announced that it almost quadrupled profits over the last three months, up to the end June. This was due to an influx of demand during Easter and the Coronation weekend.
Ryanair’s first-quarter profit was £574m, up from £147m the year before.
The fare was 42pc more expensive, and passenger traffic increased 11pc compared to a weaker comparison a year ago when the demand had been affected by Russia’s invasion in Ukraine.
Mr Sorahan stated that employment was high and workers were still able to take their annual leave.
He said that Ryanair could grow its market share in the coming months if prices were under pressure.
Mr Sorahan stated: “That is where our model really comes into its own.” Our average fare for the last quarter was €49. That puts us within the price range of the majority.
“Given the cost advantage we have over everyone else, and given the strength in our balance sheet, this gives us an opportunity to grow market share, if there’s a pullback.”
Mr Sorahan stated that despite potential price reductions over the winter, average air fares would remain above pre-Covid for up to four more years due to cutbacks made in capacity during pandemic.