By Samuel Indyk
Investing.com – UK-based airlines were trading higher on Thursday morning as markets attempt to assess the risk the Omicron variant will have on the outlook for international travel.
Early data from South Africa, where the variant was first discovered, and from across the globe appears to show that Omicron may be more transmissible than previous variants but the severity of illness and protection from vaccines is unclear.
“It is certainly possible that one of the scenarios is that the virus, as it continues to evolve, may still have a fitness advantage, meaning that it can become more transmissible than delta, we’ll have to see,” World Health Organization’s Maria Van Kerkhove said on Wednesday. “But we don’t know quite yet about the severity.”
A more transmissible variant but one that may be less deadly could end up being a positive for risk assets. That is certainly the view of JPMorgan (NYSE:JPM) strategists, who argue that this scenario may be positive as it signals the end of the pandemic is in sight as it fits the pattern of historic virus evolution.
Airline Stocks
The United States is set to announce new restrictions today, including extending requirements for travellers to wear masks and requiring inbound passengers to be tested for COVID within a day of departure.
The measures may not be as strict as during previous times throughout the pandemic and therefore could be viewed as a positive for an airline industry that is still facing problems in its recovery.
Airlines and other travel & leisure stocks were some of the biggest laggards upon the announcement of the discovery of the new variant as countries were quick to reintroduce some travel restrictions but shares have shown signs of recovering.
Despite the bounce over the last two trading days, British Airways parent IAG (LON:ICAG) remains below where it was trading on Friday before South African scientists sounded the alarm about the Omicron variant.
Wizz Air (LON:WIZZ) has recovered all the losses seen since Friday while easyJet (LON:EZJ) is around 4% below where it was trading prior to Friday’s sell off.