IAG and Ryanair lead airline share surge on positive Omicron outlook

Airline stocks – including Aer Lingus owner IAG and Ryanair – surged as positive Covid data from the WHO helped lift global stock markets.

Aer Lingus owner IAG and Ryanair led a surge in airline shares as encouraging Omicron data from the World Health Organization (WHO) lifted global stocks.

Shares surged after the WHO said it was seeing increased evidence the Omicron variant was causing milder symptoms than previous Covid-19 variants and may be less severe, due to it seemingly infecting the upper part of the body rather than the lungs. 

That is resulting in a “decoupling” of soaring case numbers and death rates in some countries, the WHO said.

While still very cautious, the WHO said it still expected current vaccines to continue to offer protection against severe hospitalisation and death. It said vaccination rates, not vaccines, are now the challenge.

Ravaged travel sector stocks bounced on the optimism and fresh prospect of a return to normal travel practices sooner than thought, with airlines leading the charge. 

Aer Lingus owner IAG surged by more than 12%, while Ryanair gained 9%, having been up as much as 10% at one stage. EasyJet rose by over 9%, Air France-KLM gained nearly 9% and Lufthansa jumped 4%.

"Investors seem to have discarded the worries about Omicron that plagued them in December, while for now the jitters about inflation and central bank policy appear to be far from everyone’s minds," said Chris Beauchamp, chief market analyst at online trading house IG.

"If the list of Ftse-100 gainers is anything to go by, then investors appear keen to put their money to work in dependable, dividend-paying stocks. IAG has surged on hopes air travel might return to normal sooner than feared, but otherwise it is banks, oil stocks and consumer spending that seems to populate the top gainers," he said.

While European stocks, as a whole, have gained 18% over the two years of the Covid crisis, travel and leisure stocks are down about 9%.

The pan-European Stoxx-600 index ended the day 0.8% higher, hitting a record high for a second consecutive session. Travel stocks jumped 3.5%.

The European banks sub-index jumped 3.3% to November highs, and was the best performer for the day as government bond yields on both sides of the Atlantic got a boost from expectations of tighter monetary policy.

• additional reporting Reuters