European travel recovery not an easy fix - Deutsche Bank

  • Deutsche Bank explains some of the headwinds for the European airline industry as COVID cases accelerate in certain areas. The analysis could dampen some of the enthusiasm over the ramping up of testing capabilities by airline companies.
  • "Rising COVID-19 infections in numerous EU countries have led the German Federal Foreign Office to issue more travel warnings. In some cases, these travel warnings apply to whole countries (currently Spain, the Czech Republic and Luxembourg), in others only to certain regions in given countries (for example large parts of France, the Netherlands or Austria). As a rule, the travel warnings are issued because the number of new infections in a country or region exceeds the 'corona limit'. According to the Federal Foreign Office, travel warnings may be issued (or re-issued) if the cumulative number of new infections in a country or region rises above 50 per 100,000 inhabitants during the past seven days."
  • "Travellers who return from a (foreign) risk area are obliged to take a coronavirus test and isolate themselves at home until the test result is available and negative. From 1 October, the rules will change. In place of the mandatory test upon the return from a risk area, travellers will be isolated for at least five days after their arrival. Once the five days are over, the quarantine may be lifted if a test result is negative. Neither option is really appealing for travellers. By the way, there is no comparable automatic rule for people who return from districts or cities in Germany that exceed the corona limit."
  • "While policymakers have always emphasised that a travel warning is not the same as a travel ban, the difference does not really matter in practice. Many tourists cancel their trip once a travel warning has been issued. Some may indeed be scared by rising infection figures; others will want to avoid the quarantine, even if it may be lifted once a negative test result is available. Moreover, asymptomatic potential patients may not always find it easy to get tested on short notice."
  • European carriers: British Airways (OTCPK:ICAGY), easyJet (OTCPK:EJTTF), Ryanair (NASDAQ:RYAAY) Deutsche Lufthansa (OTCQX:DLAKF, OTCQX:DLAKY), Air France-KLM (OTCPK:AFRAF), SAS Group, Jet2 (OTCPK:DRTGF), Virgin Atlantic, Wizz Air (OTCPK:WZZAF), Aeroflot (OTCPK:AERZY), Finnair (OTC:FNNNF), Norwegian Air (OTCPK:NWARF), Air Berlin (OTCPK:AIBEF)
  • U.S. carriers: Delta Airlines (DAL -2.5%), United Airlines (UAL -4.0%) and America Airlines (AAL -3.8%).
  • Related ETF: U.S. Global Jets ETF (NYSEARCA:JETS).
  • Last week: Airlines look to antigen tests as pandemic fix

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