Ryanair and British Airways under the cosh over refund calamity, and SSP still waiting for a recovery

“Sterling strength weighed on the multitude of UK stocks that earn in dollars, dragging the FTSE 100 down 0.3% to 7,071. Miners and various large companies that do business in overseas territories were in negative territory, including Unilever and HSBC,” says Russ Mould, Investment Director at AJ Bell.

“Investors were more optimistic about the travel and leisure sector on increased hopes that many travel restrictions will be lifted soon. The US Centers for Disease Control and Prevention has relaxed travel advice for more than 110 countries and territories, thereby increasing the earnings prospects for companies that provide transport or accommodation.

“Hotel stocks Whitbread and InterContinental Hotels were both among the biggest risers on the FTSE and airline stocks across Europe were in demand, including Air France, Lufthansa and International Consolidated Airlines.

“These companies need all the good news they can get, given how so many other businesses have put Covid in the rear-view mirror and are making plans for the future. Travel and leisure companies have been stuck in survival mode and desperately want to move forward.”

Ryanair/British Airways

“It should come as a surprise to no-one that Ryanair and British Airways are still being dragged over the coals by the Competition and Markets Authority over the way they tried to squirm out of refunding customers who couldn’t fly during the pandemic.

“Their actions did them no favours at the time, making customers angry and potentially alienating many people from flying with them again.

“That said, a lot of people declared at the start of the Covid crisis that they wouldn’t use businesses which treated staff or customers unfairly during the pandemic, such as airlines and pub operator Wetherspoon. However, the backlash against such companies seems to have quickly faded.

“Ryanair and British Airways were trying to avoid handing back cash at a time when their finances were under severe pressure and it will be up to the courts to decide if they broke the law by pushing vouchers instead of cash refunds.

“They’re still operating under severe restrictions, so the natural response from the airlines would be to criticise the CMA probe, implying it is kicking an industry which is already on its knees.

“Aside from potentially losing business in the future from irate travellers turning their backs on the airlines, the worst-case scenario might be compensation for some affected customers. The airlines would kick and scream, but ultimately they would pay and move on.”

SSP Group

“The experience of travel food outlet group SSP is a lesson in what happens when your biggest asset as a business becomes your biggest weakness.

“Where previously SSP benefited from a captive audience in airports and railway stations, allowing it to charge premium prices for sandwiches and coffee, that audience has now shrunk beyond all recognition thanks to the global pandemic. It was a scenario that SSP would not have countenanced in its worst nightmares.

“And it’s not as if the company can lean on a takeaway service or pick up passing trade from elsewhere – after all, nobody wonders by the Gatwick Airport terminal when they’re taking a daily stroll.

“Inevitably its first half results are about as grim as could be, however the question now is to what extent and how quickly its pool of prospective customers will come back. This is entirely out of SSP’s control, depending as it does on the course of the pandemic and the response of global governments.

“The group has done pretty much everything it could to batten down the hatches and ride out the current turbulence, cutting costs and raising fresh funds from investors to give it some breathing space despite tens of millions going out the door each month.

“Like the travel operators and airlines, SSP would have been hoping for a more normal summer to really get the turnaround in its fortunes underway but uncertainty prevails.

“At least a boom in staycations and uptick in people travelling by rail in the UK and on domestic flights in the US could provide some comfort to SSP.”

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