Airlines fly lower ahead of traffic stat updates

Shares in airlines flew lower on Monday due to concerns that there could be an extension on the ban on the carrying of laptops and tablet devices in the cabins of flights on certain routes, while rising terror concerns in Europe and Middle East tensions caused worries about leisure travel and oil prices.

The International Air Transport Association, noted "a surge in passenger demand" in April with a 10.7% worldwide rise in traffic -- the fastest pace of growth for six years.

Capacity was up 7.1% on a year ago, the IATA added, reporting that the performance was boosted by lower airfares: "The price of air travel in the first quarter was around 10% lower than a year ago after adjusting for inflation."

But the IATA added that the US laptop ban "may be affecting" Middle East-US traffic.

The White House last month admitted it was considering expanding a ban on laptops and other tech devices to all flights entering and leaving the US. John Kelly, the head of the Department of Homeland Security, told Fox News that the ban may be introduced globally in order to combat terrorism.

"Airlines have also slipped back over concerns that an extension to a laptop ban to include tablet devices could cause a revenue loss of up to £1bn globally," said Michael Hewson at CMC Markets.

"It appears that passengers are avoiding routes that have a ban in place according to the IATA. This would put further pressure on an industry that, while doing well is already finding margins slim."

Shares in Easyjet and British Airways owner IAG were both near the bottom of the FTSE 100 on Monday, both down over 2.5%

Jasper Lawler at London Capital Group suggested the underperformance of travel and leisure stocks was "a distinct reaction to the terror attack on London Bridge, with Merlin Entertainments and Carnival also among the worst-performers on the FTSE 100 on Monday.

"The negative reaction reverses the recent trend of less market-impact after each terror attack," he said.

Both EasyJet and IAG also are due to report their monthly travel stats on Tuesday.

Last week, based on its view that the low cost airline industry was improving structurally, HSBC bumped up its price target on Easyjet as it expects to see evidence of the airline’s recovery mount through the summer, though traffic and revenue trends in May and June are expected to be "more moderate".

The bank, which reiterated its 'buy' recommendation, raised its target price to 1,550p from 1,450p as it made small upgrades to its profit estimates after raising load factor and trimming reported yield reduction estimates, buoyed by increasing evidence that the current quarter will be a strong one.