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More suffering for IAG or Meliá: Europe increases control measures for Spain

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IAG It has fallen by 0.4%, although it has fallen by 5%, with a tourism sector very beaten by the recommendations of almost all European countries of exercise extreme caution when traveling to Spain or, directly, not flying to the country if it is not a case of extreme necessity. The governments of Austria and Denmark join a long list by issuing travel alerts for Spain, with the exception of the Canary Islands and the Balearic Islands, for fear that their citizens will choose the Spanish territory as a holiday destination in the middle of the coronavirus pandemic.

The decision has been made one day after Switzerland will include Spain in the list of countries whose travelers will have to undergo a quarantine ten days to enter Swiss territory, although it has excluded, in turn, those who come from the Canary Islands and the Balearic Islands. These countries now join others such as the United Kingdom, Germany or France, which have recommended not to travel to Spain or have directly imposed a quarantine on travelers from Spanish soil.

In general, a good number of European countries have decided to establish more restrictive control measures in relation to Spain, where outbreaks of Covid-19 have increased notably in recent days and there has been a significant increase in the number of infections, particularly in regions such as Aragon, Catalonia, Navarra, the Basque Country or the Community of Madrid.

As a whole, the countries that have applied new measures at the moment do not prevent going to or coming back to and from Spain, but they do influence in advising against non-essential trips to the whole country or – depending on the case – to the areas most affected by the new outbreak, as well as -in some of them- establish quarantine procedures.

In addition, the US announced this Thursday that it withdraws its recommendation to avoid travel to all countries in the world due to the coronavirus, which has changed individual recommendations such as the one issued for Spain, in which case it asks its citizens to "reconsider" the possibility of traveling to the country.

This scenario has forced airlines to change their forecasts and delay their initial recovery ideas that they had projected for 2023. Thus, the International Air Transport Association (IATA) estimates that world passenger traffic will not return to pre-Covid-19 levels until 2024, one year later than previously planned.

IATA data warn of a weak recovery in the sector until July, with air traffic remaining 63% below 2019 levels. The previous estimate predicted a somewhat lower drop (55%). In addition, air traffic in 2021 is expected to remain 30% below that registered in 2019.

HIGH VOLATILITY IN IAG

IAG is especially noticing the shaking of this situation and its securities are struggling not to confirm the loss of the support they present in the annual lows (1.80 euros) in closing prices. In any case, volatility has marked the value this week, which also moves to the sound of the news about the company, between the closing of the Iberia-Air Europa alliance and the capital increase.

The € 2,750 million transaction must be approved by shareholders on September 8. The main shareholder, Qatar Airways (25.1% of the capital), announces that it will attend the expansion. The funds will be used to clean up the balance sheet and reduce debt (good for solvency). It would only be private capital, and with this approach it rules out state entry, as has happened with Lufthansa or KLM-AirFrance.

According to Bankinter analysts "it makes sense from a strategic point of view and will allow it to improve the solvency that has been deteriorated by COVID-19. As a reference, the Group's leverage (debt over Ebitda) has increased to 4.2x from 1 , 4x to December 2019 and the DFN has increased to € 10,463M from € 7,508M in 1Q20 ".

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