European Union Seeks to Open Its Borders to Vaccinated Travelers this Summer
If you were hoping to visit the Eiffel Tower or Colosseum this summer, you may be in luck. European Commission officials proposed on Monday that member European Union (EU) states should start allowing fully vaccinated foreigners to enter for “non-essential reasons.”
For months now, I’ve been saying that the EU represents the next leg in the recovery of commercial air travel. With the 27-member bloc ready to begin receiving international tourists, it may be time for investors to act.
Here in the U.S., domestic leisure travel has largely rebounded thanks to an aggressive vaccine rollout, and many carriers are capitalizing on the pent-up wanderlust by announcing new summer routes to popular vacation destinations. American Airlines in particular is betting big on summer, with 150 new routes available to travel-starved Americans starting next month. Ninety percent of its seat capacity will be open compared to summer 2019.
This has helped lift U.S. airline stocks up nearly 24% for the year and 100% for the 12-month period.
European airline stocks, meanwhile, have struggled to get off the ground with the EU still off-limits to visitors from all but seven countries, including Australia and Singapore. The news of relaxed travel restrictions, I believe, signals an incredible buying opportunity, especially for low-cost leisure-focused carriers.
Among our favorites are Hungary’s Wizz Air, Ireland’s Ryanair and the U.K.’s easyJet. We like them for their ability to generate strong revenues from ancillary, or non-ticket, fees (think extra legroom, WiFi, hotel accommodations and more). In 2019, ancillary revenues represented a whopping 45.4% of Wizz Air’s total revenue, 4.3 percentage points higher than the previous year, according to consulting firm IdeaWorks. Ryanair’s ancillary revenues were 34.5% of total revenue; easyJet’s, 21.6%. For comparison’s sake, major long-haul carrier Lufthansa generated only 8% of its total revenue from ancillary means.
EU Vaccine Rollout Expected to Improve After Lagging Other Economies
The EU’s reopening comes as its vaccine rollout “turns the corner,” according to the Wall Street Journal. Up until now, the number of vaccinations as a share of its populations has very much lagged those in the U.S., U.K. and Israel. As of May 4, less than 10% of people in the EU were fully vaccinated, compared to 23% of Brits and 32% of Americans.