Is it game over for FTSE 100 travel stocks?

At yesterday’s close, the FTSE 100 index was down by less than 1% compared to Friday’s close. This can be chalked up to the fluctuations of any average trading day. But it was a far from routine day for travel stocks. The two biggest losers were International Consolidated Airlines Group (LSE: IAG) and Rolls-Royce (LSE: RR).They were down by 5.1% and 4.8%, respectively. 

Omicron variant’s shadow hangs over travel stocks

Much as I would like to think of this as a random occurrence, I doubt if that is so. I think this is the Omicron variant’s shadow hanging over them. On 25 November, the threat of the latest variant became apparent as direct flights from six African countries were banned. Since then, these stocks have suffered disproportionately. 

The IAG share price lost more than 17% of its value (although it’s up almost 11% in a year), while Rolls-Royce stock was down by almost 15% (and down 1.5% in a year). By contrast, the FTSE 100 index showed a smart recovery recently after an initial wobble. It even rose above the levels last seen at the end of November. And as of the last close, it was down by only 1.1% since 25 November.

At the present time, IAG and Rolls-Royce are trading not that much higher than penny stocks. IAG was at 130p and Rolls-Royce at 117p  at Monday’s close. And it is quite possible that an even bigger dip is in store. The first Omicron variant related death has been reported. Were I feeling adventurous as an investor, I would be tempted to throw my hat in the travel ring. Or throw another hat, I should say, because I have already bought IAG stock. 

Would I buy these FTSE 100 stocks?

But there is such a thing as investing fatigue as I am beginning to realise, when it comes to focusing on recovery shares. Travel and travel-related stocks have had it so bad for so long, I am starting to doubt if they will be able to get their act together any time in the near future. Consider this. It has been almost two years since Covid-19 first made itself known and around one year and nine months before the seriousness of the situation really started becoming apparent. Two years of relatively limited business has taken a toll on these companies’ finances. 

I would hold out some hope for the future, but the situation still looks uncertain. It could, of course, happen that there is a rapid turnaround from this point onwards. The variant is known to be milder than some others, like Delta. And a lot of people have been double vaccinated already, even if they have not received a booster shot yet. 

My assessment

But realistically speaking, this optimistic scenario is unlikely. I will watch the situation unfold and only then decide whether to buy either more of IAG or any of Rolls-Royce. In other words, it might not be game over for them, but I am not willing to buy them right now. I would much rather focus on more promising FTSE 100 stocks.