Airlines Get Glimpse of New Normal With EU’s Reopening Plan

Europe’s battered airlines and hospitality industry were promised a gradual return to a semblance of normalcy on Wednesday, with a plan to ease coronavirus-induced restrictions on travel.

The European Union’s executive arm proposed the introduction of digital certificates that will offer proof their holders have been vaccinated, recovered from the illness or recently tested negative, and thus pose no significant health risks. The passes are meant to facilitate leisure trips both within the EU and from outside the bloc, according to a statement on Wednesday.

The European Commission also unveiled a plan for a coordinated lifting of lockdowns. The roadmap, which is explicitly meant to help restore tourism, will be based on a tier system “reflecting the epidemiological situation in each member state.”

The effort is aimed at creating a unified policy as some tourism-dependent member states threaten to unilaterally reopen to outsiders. Even with wide agreement, it will take months to implement the technology. The goal is to have the vaccine pass system in place by the middle of June, according to the proposal.

Aviation groups welcomed the proposal, while stressing the urgency of making the system operational in time for the usually lucrative summer season. The International Air Transport Association and other industry groups said in a joint statement that vaccine certificates in particular eliminate the need for travel restrictions.

Airline shares have surged in recent weeks on the expectation that vaccine rollouts and a gradual easing of lockdowns will boost holiday bookings. A gauge of European leisure and travel stocks has recouped the losses suffered at the start of the pandemic and is hovering around record highs, with Deutsche Lufthansa AG gaining 11% to date this year and InterContinental Hotels Group Plc. up 9.8%.

Airlines Get Glimpse of New Normal With EU’s Reopening Plan

An EasyJet Plc spokeswoman said in an email the carrier welcomes the EU plan. “Given the continued progress of the vaccine roll-out we must ensure there is a risk-based and data-driven approach to removing restrictions, with the objective of returning to unrestricted travel where it is possible and safe to do so.”

The London-based World Travel & Tourism Council urged the European Parliament to adopt the vaccine certificate proposal “as a matter of urgency,” while the European Tourism Manifesto alliance, which represents more than 60 travel organizations, urged the EU to work with the World Health Organization and other international bodies to pave the way to restarting international travel.

Adding to signs that the EU is shifting its focus on reopening, its leaders will declare next week that preparations should start “on a common approach to the gradual lifting of restrictions, to ensure that efforts are coordinated when the epidemiological situation allows for an easing of current measures,” according to a draft of their joint statement seen by Bloomberg. The wording contrasts sharply with their communique from last month, when EU leaders said that tight restrictions must be upheld.

Excessive Optimism

Still, the optimism that has buoyed travel stocks may be short-lived as projections show that air traffic and tourism are nowhere near their pre-pandemic levels. The pace of vaccinations in the EU lags behind both the U.S. and the U.K., the spread of infections shows little signs of abating, and officials in Brussels have warned that new strains of the coronavirus that are resistant to existing vaccines may emerge.

Kristina Mamic, an official at the state-run Croatian Tourism Community, said that overnight stays this year are expected at 60% of their pre-crisis levels. “People are eager to travel and we see an interest in bookings, but ultimately it will depend on epidemiological situation,” she said.

About 30% of hotels in Portugal won’t reopen for business in 2021 as bookings for the critical summer season remain weak, especially from foreign travelers, according to Portugal’s Hotel Association.

“We thought the vaccine announcements would bolster reservations but there was no impact,” Cristina Siza Vieira, head of the hotel association, said during a webcast event on March 3. “It’s going to be a very poor year in terms of the offer of accommodation because there will be very little demand.”

Cash Burn

Reviving travel is crucial for airlines as well as tourism dependent southern European destinations such as Spain, Portugal and Greece, that have seen revenues wiped out after the Covid-19 pandemic decimated travel. IATA has said that globally, airlines could burn through as much as $95 billion this year, almost double the industry body’s previous forecast, as new coronavirus strains lead governments to extend travel restrictions.

While there’s evidence people want to travel, uncertainty about the rules has held back reservations. Airlines in Europe have been trying to stimulate demand by lowering ticket prices for travel in the second quarter of 2021, according to Skytra, a unit of Airbus SE which collates travel industry data. While tickets booked in advance are cheaper than last minute bookings, this year they are even more discounted than usual, Skytra said.

British Airways has been calling on the U.K. Government to allow the use of digital health passports to verify vaccination or negative test results. The carrier asked for vaccinated travelers to be allowed to fly without restrictions, while unvaccinated passengers could be allowed on planes with a negative Covid-19 test.

“Vaccine passports and such like will at least enable people to travel if they want,” Neil Wilson, chief market analyst at Markets.com, said in an email. “There is so much pent-up demand.”

©2021 Bloomberg L.P.

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