I’ve been watching the easyJet (LSE: EZJ) share price like a hawk. The stock has been rising on the back of the success of the vaccine roll-out and the hopes of returning to some kind of normality.
But I’m still holding off buying the shares in my portfolio. I reckon the easyJet share price could experience some further volatility and here’s why.
Foreign holidays
Reports earlier this week suggest that people could face a £5,000 fine if they go on holiday abroad without a reasonable excuse. Also a potential third Covid-19 wave across Europe is worrying.
I don’t think this bodes well for the easyJet share price. I know the current government restrictions means that there isn’t much travelling happening, but a hefty fine and more coronavirus outbreaks could put people off further.
I don’t think this completely rules out holidays for this summer just yet. Let me be frank and say things can change very quickly. But I reckon most people may think twice about booking a trip to their favourite destination abroad.
I think it’s worth highlighting that travel demand is highly dependent on the easing of lockdown restrictions. This in turn is relies on the government’s assessment of the coronavirus data. For now, this uncertainty makes me uncomfortable so I’ll just watch the easyJet share price.
The bright side
Let me focus on the bright side. For now, easyJet is operating at 20% of its 2019 capacity. Although revenue is significantly down, the good thing is it hasn’t come to a complete stop.
The budget airliner has enough liquidity for now to weather the coronavirus storm. EasyJet has raised money through a rights issue, cut costs, and suspended its dividend to preserve cash. For me, it’s pleasing to see that it has taken the right steps.
I think easyJet has a strong brand and a value offering. The company operates short-haul flights to Europe. I reckon, when people are allowed to travel, they are likely book a short trip first. This means that easyJet should be in a good position to capitalise on this trend.
Most people haven’t been on a holiday for a while. I think there’s pent-up demand to travel, which should work out well for easyJet once travel restrictions are lifted.
What next for the easyJet share price?
Let me be honest and say that the longer the pandemic and travel restrictions drag out, it could get worse for easyJet.
The vaccine roll-out across the UK has been successful to date. But an economic downturn could slow down the air travel recovery. A rise in unemployment could mean that people may put off their holidays in order to save money.
In terms of the easyJet share price, I’m adopting a wait-and-see approach. I’ll hold fire on buying the stock for now. I think the news on the pandemic is changing at a rapid rate that we may even be given the green light to travel abroad in the next month. It’s probably wishful thinking but I guess I’ll have to wait and see.
