LONDON (ShareCast) - The European listed airline and travel sector is likely to be weak on the back of potential flight disruption from volcanic activity in Iceland, according to analyst Robin Byde from Cantor Fitzgerald, but the recent sector sell-off means there will not be much altitude lost.

His comments came after the UK Met Office warned of the risk of an eruption at Iceland's Bardarbunga volcano.

The risk level has been raised to orange, the second-highest level, and the aviation industry has been warned about the possibility of flight disruptions.

Large seismic tremors have been recorded at the volcano in recent days, though there haven't been any eruptions yet.

Byde drew comparisons with the 2010 ash cloud caused by the Eyjafjallajokull volcano which shut down much of Europe's airspace for six days.

He said that while the impact on earnings was "fairly modest", stocks across the airline sector were down 30% over a three-month period.

"Although this is an early warning and clearly a lot will depend on whether there is an eruption, wind patterns etc, investors will be concerned for trading and earnings," Byde said.

"However, we also note that the European airlines sector is down 30% since April and, although we expect this news to weigh on the sector, this recent sell-off might limit further weakness."

Airlines were weaker across the board on Wednesday with Easyjet, IAG and Dart trading in the red, along with travel operators Thomas Cook and TUI Travel.

BC

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