Travel stocks rally as EU prepares to open borders to vaccinated holidaymakers

LaToya Harding
·4 min read
People sit at a cafe's terrace close to Duomo square on April 26, 2021 in central Milan. - Bars, restaurants, cinemas and concert halls will partially reopen across Italy Monday in a boost for coronavirus-hit businesses, as parliament debates the government's 220-billion-euro ($266-billion) EU-funded recovery plan. After months of stop-start restrictions imposed to manage its second and third waves of Covid-19, Italy hopes this latest easing will mark the start of something like a normal summer. (Photo by Miguel MEDINA / AFP) (Photo by MIGUEL MEDINA/AFP via Getty Images)
The EU is expected to greenlight travel from countries with low COVID infection rates in a bid to restart its tourism industry after tight restrictions were imposed last year. Photo: MIGUEL MEDINA/AFP via Getty Images

Travel and leisure stocks rallied on Tuesday after the European Union (EU) suggested it would open its borders to fully vaccinated foreign tourists from next month.

The EU is expected to greenlight travel from countries with low COVID-19 infection rates, such as the UK, in a bid to restart its tourism industry after tight restrictions were imposed last year.

Officials at the European Commission (EC) said it was also legislating to provide for powers to pull an “emergency brake” if necessary. This would be reviewed every two weeks.

The requirement to undergo COVID testing before and after arrival, or to quarantine, could still be enforced by individual states.

Under the plans, children who have not been able to receive a vaccine should be able to travel with their parents as long as they present a negative test. In addition to this, only those with EU approved vaccines - Pfizer (PFE), Moderna (MRNA), AstraZeneca (AZN.L) and Janssen/Johnson & Johnson (JNJ) - can enter.

Ursula von der Leyen, president of the EC, tweeted: “Time to revive the tourism industry and for cross-border friendships to rekindle – safely. We propose to welcome again vaccinated visitors and those from countries with a good health situation. But if variants emerge we have to act fast: we propose an EU emergency brake mechanism.”

Watch: European travel stocks rise as Covid-19 restrictions ease

The news sent shares in IAG (IAG.L), which owns British Airways, TUI (TUI.L), EasyJet (EZJ.L) higher in London, which helped to lift the FTSE 100 (^FTSE) back above the 7,000 points mark.

Whitbread (WTB.L), which has Premier Inn hotels in the UK and hotels in Germany also gained more than 2% on the day.

In Europe, Lufthansa (LHA.DE) and Air France (AF.PA) rose 3% and 1%, respectively.

IAG shares jumped on opening on Tuesday. Chart: Yahoo Finance
IAG shares jumped on opening on Tuesday. Chart: Yahoo Finance

It comes as Europe is catching up fast on vaccinating its population after a sluggish rollout programme at the start of the year, lagging behind the UK and the US.

The region expects to ramp up their vaccinations to fully cover 70% of the population by mid-July.

Currently, only Australia, New Zealand, Rwanda, Singapore, South Korea and Thailand are on a green list allowing for non-essential travel into the EU.

The 27 member states also want to include non-EU countries such as Norway, Iceland and Switzerland, with officials saying that vaccinated travellers from the US may also be able to visit Europe this summer.

The UK is also set to resume international travel for leisure purposes this month, from 17 May, however, reports have indicated that Britain is preparing to cautiously greenlight up to 8 or 9 EU nations for travel this summer.

Read more: European stock markets climb on economic recovery optimism

A traffic light system is set to be unveiled this week. Countries will be added to green, amber and red lists, with different rules under each system such as quarantine of returning travellers and PCR tests.

Portugal, Malta and Gibraltar are expected to be green listed countries, where testing will be required before travel but not quarantine after returning. Spain and France are likely to be on the amber list initially where home quarantine is still required. Red list countries are likely to include Brazil, UAE and South Africa, requiring quarantine in government-mandated hotels.

Yesterday UK prime minister Boris Johnson urged Britons to be cautious when making holiday bookings.

“We will be saying more as soon as we can,” he said. “I think that there will be some openings up on the 17th, but we have got to be cautious and we have got to be sensible and we have got to make sure that we don’t see the virus coming back in.”

Agreement on opening of European borders is due to be sought from EU member states during meetings taking place on Tuesday and Wednesday.

Watch: Boris Johnson: Cautious approach to foreign travel needed to avoid influx of disease