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COULD 2022 be the year that the travel sector finally gets a break? That’s what investors in travel stocks want to know. And there are a number of signs that 2022 could shape up to be a much better year for the beleaguered travel industry.
Shares in travel companies - from British Airways-owner International Consolidated Airlines Group (IAG) to plane engine giant Rolls-Royce (RR.) - have risen in the past few days alongside hopes that worldwide travellers would be released from at least some of the costly and bothersome shackles of pre-departure covid testing.
The scrapping of pre-travel testing, which has slashed around £500 off the cost of a trip for a family of four - is welcome news. But it’s not all there is to give shares a boost. The oil price could also be heading the right way for the travel sector too, if - as anticipated - the agreement this week between the world’s largest oil-producing countries and their allies to increase oil production from next month, sees the oil price slide.
Cheaper fuel costs would be widely welcomed by the world’s airlines in particular; adding, as the price has, to the industry’s costs at a time when scant demand means they could least afford them.
When Covid first arrived and the world effectively stopped turning in its usual way, oil supply was curtailed in response to the drop-off in demand. But as demand has shot back up and with supply still only two-thirds of what it was pre-pandemic, costs have, as a result, also shot up.
More oil though will surely mean prices come down - a win for UK inflation-hit households - although we will have to wait until next month when the regulator Ofgem announces its update to its energy price cap to see just how hard hit consumers are. And also, of course, another win for the travel sector.
While, as we all know, the pandemic is far from over, the decision by OPEC+, the group of oil producing countries and its allies, to increase production by 400,000 barrels a day next month, is seen as a sign that the beginning of the end of the pandemic is coming into view.
The new year has certainly started with travel stocks in buoyant mood. Shares in Wizz Air (WIZZ), IAG and Rolls-Royce, two of the most-actively traded stocks on the Fidelity platform in 2021, and easyJet (EZJ) have all risen in the past few days on the back of hopes of a better year ahead. So have shares in tour operator TUI (TUI) and Intercontinental Hotels Group (IHG) which owns hotels and resorts around the world.
But high hopes have also been tempered by data which suggests that the sector is not out of the woods yet. While Ryanair’s latest figures show that its planes were, on average, 81% full in December, that was slightly lower than in October and November, although similar to the July to September period. But it did fly 9.5 million passengers this December, compared to only 1.9 million in December 2020.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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