Airline shares tumbled the most since the early days of the Covid-19 pandemic, after European countries banned flights from South Africa to slow the spread of an emerging virus strain.

The UK will halt flights from SA and several neighbouring countries for two days, and require a 10-day hotel quarantine for those who arrive starting on Sunday. Germany said on Friday it will only allow airlines to transport German residents back into the country, while European Commission president Ursula von der Leyen proposed an “emergency brake” on air travel from SA.

The Bloomberg EMEA Airlines Index sank as much as 12%, the biggest decline since March 2020. British Airways parent IAG was down 11% as of 9.08am in London, while Lufthansa, Ryanair and Air France-KLM registered drops of similar magnitude.

The border clampdowns mark a further blow to an airline industry whose recovery has been stalled this month by a fourth wave of coronavirus cases that triggered fresh lockdowns in Europe. Restrictions in Austria and elsewhere have cast a pall over popular ski getaways, while dampening enthusiasm for year-end holiday travel, according to Ryanair CEO Michael O’Leary.

“This is the worst early Christmas present that the airline industry could think of,” said Nick Cunningham, an analyst at Agency Partners in London. “To quote Yogi Berra, this is déjà vu all over again.”

The emerging virus strain first identified in SA has alarmed health officials across the world, suggesting more countries could shutter borders. Israel and Singapore have also curbed access, while the EU “emergency brake” allows EU member countries to act quickly to limit risks. 

Stunted Recovery

Airlines, one of the industries hardest hit by the Covid-19 pandemic, have been slowly building back capacity since June, with a focus on shorter regional flights as countries started to lift border restrictions. 

Long-distance travel also got a boost when the US reopened its borders to European visitors and others this month, but that progress was already starting to wane.

Carriers had also started to bring back flights to countries like SA, a popular winter sun destination. British Airways was set to restart daily services to Johannesburg by mid-December, while ramping up flights to Cape Town.

“We’re working through plans for our customers and colleagues currently in SA and those due to travel from the UK in the coming days,” British Airways said in an emailed statement.

Neighbouring Botswana, Eswatini, Lesotho, Namibia and Zimbabwe were also placed on to the so-called red list, with a two-day flight ban starting at midday on Friday. After Sunday, arriving travellers are subject to an expensive 10-day hotel quarantine.

The measures mark the biggest change in the UK’s Covid-19 travel rules since the so-called traffic light system was overhauled earlier in the autumn to ease border crossings. 

Sudden change

Virgin Atlantic Airways had a London-bound flight from Johannesburg in the air when the news of the red-list came through on Thursday night, a spokesperson said. Officials instructed people coming off the overnight flight to self isolate, a spokesperson said.

A planned relaunch of Virgin Atlantic flights to Cape Town on December 17 is likely to be put on hold, the spokesperson said. Services to Johannesburg went daily on November 8 and links are likely to be maintained to allow Britons to fly home, albeit under strict quarantine conditions on their arrival. 

Between 500 and 700 people daily arrive in the UK via SA on flights, a number that would normally be expected to increase in the next four to six weeks due to seasonal travel.

The real test for airlines will come after generally slow winter months, according to Davy analyst Stephen Furlong.

“Airlines, in the main, have excess liquidity and will wade out the winter period,” he said. “Key will be booking profile in early 2022 for the summer 2022 season, really Easter onwards.”

Bloomberg. More stories like this are available on bloomberg.com