Europe Airline Stocks Fall Again as Heathrow Imposes Passenger Cap

By Geoffrey Smith 

Investing.com -- European travel stocks came under fresh pressure on Tuesday as London's Heathrow Airport joined a growing list of airports to cut capacity over the peak summer season due to staffing shortages.

The move by Europe's busiest airport is the latest illustration of how quickly the travel industry has run into capacity constraints as consumers release pent-up demand for travel after two summers badly affected by Covid-19. The news had a harder impact on those exposed to travel in general rather than those who specifically use Heathrow. IAG (LON: ICAG ), the parent company of British Airways, was down 0.3%, while Ryanair (IR: RYA ) stock was down 3.4% and EasyJet (LON: EZJ ) stock was down 1.3%. Tour operator On The Beach (LON: OTB ) fell furthest, with a drop of 4.8%, while Spain's Melia Hotels (BME: MEL ) fell over 3%.

Hotel and tour operators and airlines all underperformed the broader market after Europe's busiest airport said it will impose a daily passenger cap of 100,000 for the next two months. That's around 4% less than airlines had wanted to move through the airport in that time. 

Many airlines had already pruned their schedules after being reassured by the U.K. authorities that they would not lose their jealously-guarded landing slots as a result. However, Heathrow said the voluntary restraint by airlines hadn't gone far enough. 

"We believe that further action is needed now to ensure passengers have a safe and reliable journey," the airport said. "We have therefore made the difficult decision to introduce a capacity cap with effect from 12 July to 11 September."   

London's second-busiest airport Gatwick had already cut its capacity for July and August by 8% and 6%, respectively, from their pre-pandemic levels, citing a similar problem with lack of staff. Many staff - especially EU nationalities - who had been let go during the pandemic have either not returned to work or, in some cases, have left the U.K. altogether, partly due to Brexit-related restrictions on their rights to live and work there. 

However, the problem is by no means restricted to the U.K.

Amsterdam's Schiphol airport had also said last month it will cut passenger numbers over the summer by around 16%. That's ahead of a permanent reduction in capacity planned for next year to address noise pollution levels.