InvestmentsJun 3 2020

Travel stocks to slip from FTSE 100 as Covid bites

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Travel stocks to slip from FTSE 100 as Covid bites
ByImogen Tew

Travel companies Carnival and Easyjet are set to fall from the UK’s blue chip index during this quarter’s reshuffle as their share prices continue to plummet during the coronavirus crisis.

According to The Share Centre, today’s announcement (June 3) on the relegations from and promotions to the FTSE 100 will likely see cruise company Carnival and budget airline Easyjet slip from the index.

Carnival’s shares have plunged nearly 60 per cent since the crisis first hit Europe, after cruise passengers were stranded and quarantined on ships for weeks.

It is expected Carnival will rank about 150th in terms of market cap — far below the 110th slot needed to stay in the FTSE 100.

Despite a recent recovery, Easyjet’s share price is roughly half of what it was in February and is set to rank at 121st in terms of market cap, so will fall into the FTSE 250.

It has been one of the worst affected stocks from the coronavirus as governments shut down borders, imposed quarantines and cancelled flights.

The coronavirus crisis has seen 17 per cent wiped from the UK’s blue chip index since the start of 2020 while the FTSE 250 has dropped nearly 20 per cent.

Aerospace engineering group Meggitt is also expected to see relegation. It had already felt the pinch of the grounding of Boeing’s 737 Max planes following two accidents last year, while the coronavirus exacerbated the issues when planes were grounded, meaning less need for parts and components.

Helal Miah, investment research analyst at The Share Centre, said: “This FTSE reshuffle is highly reflective of the current crisis environment; out go stocks from sectors that have taken a beating and questions arise as to how and whether some of these can manage this crisis.

“Carnival, Megitt and Easyjet all head lower as the travel sector has taken a pounding.”

Centrica, the owner of British Gas, is also set for relegation having just scraped into the blue chip index over the past few years.

Every quarter, UK companies are ranked in terms of their market capitalisation. If a company falls below 111th it is demoted from the FTSE 100, while a company needs to rank 90th or above to be promoted to the index.

This quarter’s reshuffle, set to be announced after markets close today, will come into effect in a few weeks.

Companies joining the FTSE 100, according to The Share Centre, will include software security group Avast which now ranks at 75th place. It has clawed back all its initial losses when the virus hit as people working from home looked to tighten their security software.