EasyJet and cruise operator Carnival are set to lose their place in the FTSE 100 index of the UK’s biggest companies following the collapse in their share prices due to the coronavirus pandemic’s impact on the travel industry.
The budget airline has lost half of its market value since the start of the pandemic as almost all flights have been cancelled, and the aviation industry warns it will take years to convince people to take to the skies in the same numbers they did before the virus struck. EasyJet last week announced plans to cut 4,500 jobs, although it plans to restart flights on the majority of its routes this summer.
Carnival, the world’s largest cruise operator, has seen its shares drop by 70% since the start of the year. The cruise industry has been among the worst-affected sectors as several ships were hit by outbreaks of infection, and some cruises have been cancelled until at least October.
EasyJet and Carnival are expected to be joined in relegation by Centrica, the UK’s largest energy supplier, and engineering company Meggitt.
They will be replaced by companies in the ‘second division’ FTSE 250 which have seen their market values leapfrog those at the bottom of the bluechip FTSE 100 index.
Those jostling for promotion are GVC, the gambling company that owns Ladbrokes and Bwin; cybersecurity firm Avast; Kingfisher, the group that owns B&Q and Screwfix; home repairs company Homeserve; and medical equipment supplier ConvaTec.
Under the FTSE 100 index’s rules, a company is automatically relegated if it falls below 111th place among qualifying companies on the London Stock Exchange at the end of each quarter. Promotion is given to FTSE 250 companies that rise to 90th position or above.
The latest quarterly calculations are based on the closing share prices on Tuesday 2 June, and announced officially by FTSE Russell, the company that runs the index, on Wednesday.
The broadcaster ITV and hotel and restaurant company Whitbread are also suggested to be close to the relegation zone.
Russ Mould, investment director at investing platform AJ Bell, said he expects four companies to be relegated and promoted, but if more companies change it would be the biggest shakeup in decades: “Six promotions and relegations, for a total of 12 changes, have not been seen in one single quarterly reshuffle since September 1992 and even four pairs changing places is relatively rare, with the last instance of this being March 2016.”
Nicholas Hyett, an equity analyst at investment group Hargreaves Lansdown, said: “The world has changed since the last FTSE review at the beginning of March.”
Inclusion in the FTSE 100 index is important both for companies’ reputations and because some investment funds only buy shares in the UK top 100 companies – and may therefore be forced to sell their stakes in easyJet and Carnival.