Airlines poised to exit FTSE 100 as virus hammers travel firms
Budget airline easyJet and cruise operator Carnival are set to tumble out of the FTSE 100 after being battered by travel restrictions during the coronavirus pandemic.
Despite a slight lift in value in recent weeks amid optimism about loosening restrictions, both firms have more than halved in value over the past three months.
The travel operators could also be joined on their way out, 27 May, by aerospace parts firm Meggitt and British Gas owner Centrica, in what could be the biggest reshuffle since the 2008 financial crisis.
Helal Miah, investment research analyst at the Share Centre, said: “This reshuffle looks set to be one of the biggest in many years, we expect a minimum of four in, four out – but depending on market moves we could see more.”
He said the “clearest candidate” to slip from the top index is Princess Cruises owner Carnival, which has seen shares dive nearly 60% since the crisis first hit Europe as travellers were left stranded on quarantined ships for weeks.
Further cruises have been halted and bookings have dried up, meaning its market capitalisation has continued to slide despite raising more funds to support the business.
The second most likely casualty is easyJet, which only returned to the index in December 2019.
Similarly to Carnival, sentiment remains low as revenues continue to dwindle on the back of mass cancellations.
Centrica trades in an area less impacted by the virus but the firm has hovered perilously close to relegation recently amid a tough environment for energy providers.
Meggitt entered the FTSE 100 last year but is another firm which has been heavily impacted by travel restrictions as aerospace manufacturers have seen production slow as a result.
Analysts have said ITV and Pearson are also at risk of leaving the FTSE 100.
Meanwhile, Avast, Homeserve, Ladbrokes owner GVC and Convatec have been earmarked as the most likely firms to move into the index.
Russ Mould, investment director at AJ Bell, said Kingfisher, Foreign & Colonial Investment Trust, B&M European Value Retail and Direct Line are also “jockeying for position and sudden gains in their share prices could yet vault them into the UK’s premier index”.
He added: “If they make the leap, GVC and Convatec would be returning to the FTSE 100 for the first time since March 2019 and December 2017 respectively, while Homeserve and Avast would be making their debuts in the premier index.”