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European journey shares are nowhere close to as excessive as they have been earlier than the corona virus

A sign indicating the full capacity beach stands on Bogatell Beach in Barcelona, ​​Spain.

Bloomberg

European travel and leisure stocks have recovered in recent weeks, but still have a long way to go before returning to pre-crisis levels.

The travel and leisure sector Stoxx 600, which comprises 16 companies, decreased by 42% in the first quarter of 2020. This was due to Europe-wide blocking measures and more extensive travel restrictions to contain Covid-19. In comparison, the sector grew 6% in the second quarter of 2020.

"You will have difficulty seeing a linear recovery here," Mark Manduca, a travel and leisure analyst at Citigroup, told CNBC on Monday.

He added that it was "too optimistic" to believe that the sector would recover to pre-crisis levels in the next six to twelve months.

European economies started to open again in the second quarter as infection rates slowed. However, this has been done gradually and there are still many travel restrictions.

For example, Greece still doesn't welcome British tourists and Many summer destinations have reopened their doors with strict social distance measures that will limit the capacity in hotels and restaurants.

"Equities have risen over the past 30 days, which we believe is due to more countries easing travel restrictions, companies gaining additional sources of liquidity and the market turning into cyclical areas," said UBS analysts in a previous note on European ones Airlines month.

"Still, the industry is facing the most challenging summer season in decades," they added.

The industry needs to convince customers that travel is safe to drive demand.

EasyJet announced earlier this month that capacity growth is expected in the summer season, but estimated that capacity in the fourth quarter of the fiscal year (between June and September) will only be 30% of its pre-Covid 19 numbers.

Ryanair said in May that it will carry no more than 50% of its original traffic between July and September.

"Summer will be an artificial boost," Manduca told CNBC on the phone, predicting some structural changes in the broader aviation sector.

Short-haul and affordable airlines are likely to recover faster because their operations are easier to manage.

Airlines were one of the worst hit companies by the pandemic. However, there has been significant government intervention to keep some of them afloat.

For example, Lufthansa has agreed a bailout of 9 billion euros with the federal government. In France, the government also developed a € 7 billion bailout package for Air France-KLM's French arm, while the other half received a bailout from the Dutch government.

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