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Spread of Ebola would hurt airline and hospitality industries - Deutsche Bank

FXStreet (Łódź) - Andrew Zarnett, Research Analyst at Deutsche Bank looks at the possible consequences of a wider Ebola outbreak.

Key quotes

"History has shown us that should the Ebola epidemic spread domestically, it will have a significant impact on the airline and the entire hospitality sector."

"While, at this juncture, the risk of an outbreak is low, it is still prudent to understand the impact that could occur should the disease begin to spread. Further, it would not just be the physical spread that would have negative connotations but the FEAR from an outbreak that could and would have a larger negative impact on the hospitality sector."

"Fear of contagion, very early, would lead to a reduction in people’s willingness to travel, eat in restaurants, drink in bars, and quite frankly do anything social. The addition of masks would become a much-wanted clothing item by many."

"Concerns have not affected passenger volume so far. On October 2, 2014, the International Air Transport Association (IATA) stated that there is no evidence that suggest that concerns related to Ebola have been affecting passenger volumes. As per IATA, the worldwide international passenger traffic increased 5.9% yr/yr in August, following a 5.4% gain in July. Demand for North American airlines increased 3.2% in August."

"So far, so good. Nevertheless, believe more cases of Ebola or the perception of more cases could lead to an increase in the public fear of contagion."

"From an investment perspective we would advise investors to maintain positions in moderate leverage credits with strong liquidity (including cash positions) and long dated maturities. Those credits with weak liquidity and high leverage are clearly at greater risk."

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