June 29, 2020

European Airport Stocks to Watch

European Airport Stocks to Watch
European Airport Stocks to Watch

Coronavirus Shakes the EU’s Tourism Industry

The coronavirus pandemic has shaken the travel industry around the world. This downturn has been especially difficult for Europe’s economy. Tourism employs 27 million people in the region and accounts for 10% of Europe’s total GDP. For some countries, that number is even higher. In Italy and Spain, tourism accounts for 13% and 14% of GDP, respectively. Both countries have been severely impacted by the coronavirus pandemic, and lost revenue from the lack of summer tourism will put even more strain on their economies.

As a result, European airport stocks have seen substantial downturns. Since January, the sector has trailed the Stoxx Europe 600 index by 23%. Aircraft movement was down 49% between January and May, with passenger volume sinking by 57%. With that said, analysts expect some European airport stocks to recover relatively quickly, while others may be slower to rebound.

Airports Dependent on Business Travel Could Be Slow to Recover

Fraport (FRA:GR) which owns the Frankfurt airport, may have more trouble rebounding than some of its peers. Not only does Frankfurt face strong competition from nearby airports, but it also depends heavily on business travel, which is on pause right now.

Plus, with conferences around the world canceled and businesses realizing the power of video calls, companies may opt to save money on travel in the future by leaning on virtual meetings even after the pandemic subsides.

Tourism Hubs May Bounce Back More Quickly

On the other hand, some European airport stocks, like Zurich Airport (FHZN:SW) and Aéroports de Paris (ADP:FP), are poised for a faster recovery. Both these airports see heavy traffic from tourism, and analysts expect that travel for pleasure will rebound faster than business travel.

Zurich Airport in particular is more diversified than most of its peers. The airport contains hotel space, offices, and retail. Though these sectors have also been hurt by coronavirus, some analysts expect they will trickle back faster than air travel.

The EU is planning a “gradual and partial” lifting of its ban on travel to Europe from other countries this week, beginning on July 1. Investors will be carefully watching to see how this impacts European airports and their stocks.

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