Will Pfizer&BioNTech vaccine come too late for struggling airlines

ANALYSIS:

Encouraging news on a vaccine has sent travel industry stocks soaring – international cruise lines, airlines and hotel shares blasted off.

In the United States the Global Jets exchange-traded fund (JETS) soared by 16.6 per cent overnight to the highest prices seen in five months.One of the world’s biggest airlines, United, saw its share price shoot up by as much as 27 per cent.Here Air New Zealand’s share price took off by 14 per cent in early trading today.

Plane maker Boeing’s shares also went up 14 per cent.

In pre-market trading in the US cruise line stocks surged up to the tune of between 20 to 30 per cent based on news from Pfizer and BioNTech that its trial vaccine prevented more than 90 per cent of infections in a pool of volunteers.

Hotel shares of Marriott International were up 21 per cent while reservations website owner Expedia spiked by 22 per cent.

Besides Pfizer and BioNTech several other vaccine trials are making promising rapid progress too.

Two things are certain, there’s a promising vaccine and travel industry share prices went berserk when markets opened. But from here what happens is less certain.

Share prices retreated from initial exuberance throughout the day and health experts caution the Pfizer research has so far just produced preliminary analysis from a phase-three trial and more evidence is needed about how safe and effective it is and regulatory approval is needed.

Still the companies say they will apply for emergency approval to use the vaccine by the end of November and have described the research results as great for “science and humanity”. Great news for the travel industry and it needs it badly.

The share price surge was off an extremely low base and the airline industry has a lot of ground to make up when recovery comes.

The International Air Transport Association has estimate revenue into next year down 46 per cent on the $1.2 trillion of last year.

Figures out today from OAG show the worrying and steady weekly decline in global capacity continued into a fourteenth consecutive week of capacity cuts with another 1 million seats wiped out across the world’s scheduled airlines.

Current trends will take airlines below 50 million seats a week by year end which in turn would be somewhere around 54 per cent below the 106 million reported in the last week of 2019.

The analyst says more than 10 per cent of the world’s scheduled airlines have failed to survive the pandemic and, heading into the darkest parts of the northern winter, more casualties are expected. Hundreds of thousands of staff have been laid off or furloughed with many lost to the airline industry for good.

Thousands of planes have been parked in deserts in deep storage.Even when demand improves and some of the more efficient of these aircraft are needed it could take up to two months to bring them back into service.

The airlines that do survive will be different than before. Corporates will travel less and this means the high yields from the front of the plane will give airlines less scope to keep a lid on fares in economy. While there could be a surge in deals to get twitchy travellers back in planes, long term if there are fewer seats this could lead to higher prices.

Cruise companies have been worse off.While there have been some flights, ships are tied up, some have been broken up and cruise could be the last part of the travel sector to get back anywhere near normal.

Pfizer said it could have 50 million doses of the vaccine ready for shipment this year, and 1.3 billion in 2021 and it will be airlines which will play a crucial role in distributing it in what has been described by IATA as the “mission of the century”.

The vaccine must be stored in temperatures below 80C which makes distribution around the world challenging. Air New Zealand has already done work on being part of the cold chain.

Other issues for travellers and travel companies include; what will the role of the anti-vaxxers be in diminishing the international rollout of a vaccine and how will a vaccine passport regime work?

Negative tests for sale and discredited pre-flight testing, as seen in the case of the Russian mariners who came to New Zealand, emphasise the need for a legitimate, standardised global system.

The return of the United States to a multi-lateral co-leadership role under Joe Biden would help this.

Vaccine aside, the pandemic has forced airlines and other travel operators to develop a range of new health measures ranging from issuing PPE to passengers to contactless biometric passage through airports such as Dubai.

These measures can be baked into travel and, in tandem with a vaccine, will help fight Covid-19 but also other bugs that travellers are now acutely aware of.

Flight Centre’s New Zealand boss David Coombes says there is a strong pent-up demand for overseas travel.

“We’re on the cusp of exciting times. Imagine the euphoria when we’re all getting on planes again and going and seeing family and friends or going on holiday.It’s intoxicating.”

A return the Golden Age of Travel beckons but there’s a long way to go before regulators – and travellers – are comfortable to kick travel into gear.

As Harbour Asset Management’s Shane Solly says: “We can see the boarding queue but we’re nowhere near the plane yet.”

Source: Read Full Article