There have been some clear winners and losers in the stock market over recent months, with considerable dispersion within equities. 
One area hit hardest has been travel stocks, with this week’s attempted coup in Turkey and last week's Bastille Day terror attack in France causing nervousness and caution among holidaymakers.
British Airways cancelled all flights to and from Turkey on Saturday but resumed some on Sunday, while easyJet’s shares dropped in the wake of the attack in Nice.
Data from the airlines show people have since cancelled their summer holiday bookings, suggesting caution and fear may mean many are deciding to stay at home.
A similar pattern emerged last year in the wake of the Tunisia beach attack in Sousse, with bookings to the country being cancelled or rebooked immediately after the event. This also occurred after the Paris attack in November.
However, it is not only these incidents that have caused many to reconsider travelling abroad this summer.
Both International Consolidated Airlines, the owner of British Airways, and easyJet announced profit warnings following the Brexit vote, claiming that it would affect consumer confidence and as the pound plummeted in the wake of the vote against all major currencies.
Relative performance of sterling over 1yr
Source: FE Analytics
Meanwhile, this week, Ukrainian airline Wizz Air announced it has halved its expected UK growth outlook for the second half of the year, choosing to re-deploy capacity to non-UK routes.
Simon McGarry, senior equity analyst at Canaccord Genuity Wealth Management, says it is not a surprise that travel companies took a sizeable hit from Brexit.
This is due to the weaker sterling, “which will make overseas holidays more expensive,” he said, adding that this was coupled with lower wage inflation and a slowdown in the UK economy.
Vinay Sharma, senior trader at ayondo markets, added: “The airline industry has been taking a battering since Brexit, with low-cost budget airlines EasyJet and Ryanair having a particularly bad time.”
Performance of travel stocks in 2016
Source: FE Analytics
As the graph shows, even Ryanair, which reports its results in euros, took a hit in the aftermath of the referendum result, though less than its rivals.
Sharma warns “with so much uncertainty, volatility, and the threat of recession down the road, it wouldn’t be a great surprise to see the stock fall further.”
There are 23 funds which own the stock in their top 10 holdings, and many have also not performed well since the UK voted to leave the EU, though it must be pointed out that this may be down to a range of other factors, including overall management style and the fund’s other holdings.
Table of the top 10 funds with Ryanair in their top 10 holdings
Source: FE Analytics
Of funds with the highest weighting in Ryanair, only two – the Baillie Gifford European fund run by Thomas Coutts, Stephen Paice, Moritz Sitte and Tom Walsh and FE Alpha Managers Alexander Darwall’s Jupiter European fund– have performed in the top quartile since 23 June.
Meanwhile, four of the funds – James Buckley’s Baring European Growth, Niall Gallagher’s GAM Star Continental European Equity and GAM Star European Equity, and the SF Metropolis Value fund, run by Simon Denison-Smith and Jonathan Mills – are in the bottom quartile when compared to their peers.
Away from Ryanair, times have been similarly tough for funds holding International Consolidated Airlines, with the stock falling 29 per cent so far this year
Of the nine funds to include the firm in their top 10 holdings, only one - David Urch’s Garraway VT Garraway UK Equity fund - sits in the top quartile against its peers since Brexit. Meanwhile, eight of the below nine funds sit in the bottom quartile.
Table of the funds with International Consolidated Airlines in their top 10 holdings
Source: FE Analytics
Only two funds, Urch’s and Marc O'Sullivan’s Wesleyan UK Growth fund, have produced a positive return for investors over the timespan.
Wesley McCoy’s Standard Life Investments UK Equity is the fund with the biggest proportional holding of IAG (4.2 per cent of its holdings), but it sits in the bottom decile of the UK All Companies, having lost 4.66 per cent after the referendum.
Fewer funds hold a high proportion of EasyJet in their fund. In fact, only BlackRock’s £479m Institutional Equity UK Focus fund and Capita’s £12.9m Steelback fund hold easyJet in their top ten.
However, as the stock has taken a hammering this year, it is possible that it has dropped out of the top 10 of other funds that hold it.
EasyJet was one of the hardest hit of all the airlines after the EU referendum and both funds mentioned have underperformed the FTSE All Share since the start of the year, as the below graph shows.
easyJet released a statement last month saying: “The operating environment for all European airlines in May and June has been extremely challenging.
“To date, easyJet has experienced 1,061 cancellations in the third quarter due to a significant number of disruption events,” it added.
However, easyJet said in a post-Brexit statement that it is confident the result will not have a material impact on its strategy or its ability to deliver long term sustainable earnings growth and returns to shareholders.
And it may not be all bad for travel stocks, with ayondo markets’ Vinay Sharma saying they could be in line for a boost in the short term.
“While the outlook is very gloomy, airline demand could actually be boosted in the short term with a flurry of travellers wanting to take advantage of their EU passport in the two years before the UK must officially leave the EU. In this sense it may not be as bad as the markets are starting to price in,” he said.
However, shares in easyjet have fallen even more this morning after the company posted weak Q3 earnings. As such, ETX Capital’s Neil Wilson says the outlook for the budget airline is worsening.
“Coming into the key summer season – usually when airlines make their money for the year – demand is down and key routes to France and Turkey will likely see fewer passengers. Usually people would simply find another place to fly to and with plenty of routes EasyJet has always weathered such incidents in the past. This time looks different as confidence is shaky,” Wilson said.
“At the moment you would have to say the outlook is pretty bleak for easyJet and this dismal set of results will only hasten its touted move away from the UK.”
