BA parent IAG rallies as Heathrow introduces one-hour Covid test

Shares of British Airways and Iberia parent IAG rallied on Tuesday as Heathrow airport launched a one-hour Covid-19 test.

The test, which costs £80, will initially only be available for passengers travelling to Hong Kong and Italy, both of which require pre-departure testing.

The 'LAMP' tests, which will be carried out at Terminals 2 and 5, are quicker to process than PCR tests as samples do not need to be sent off to a laboratory.

IAG shares rallied on the news and by 0915 BST, they were trading up 5% at 105.10p. Other airlines also got a boost, with easyJet shares up 1.5% at 500.85p and Wizz Air up 0.9% at 3,310p. Ryanair was 1.2% higher at €12.40.

Transport Secretary Grant Shapps said on Monday that he was "very hopeful" a new testing regime for travellers to the UK would be in place by 1 December. Shapps said during an online aviation conference that the government is considering introducing a Covid-19 test and a shortened quarantine period by early December.

"My ministerial colleagues and I have agreed a regime, based on a single test provided by the private sector and at the cost to the passenger, after a period of self-isolation," he said. "It will mean a single test for international arrivals, a week after arrival."

Commenting on the one-hour tests at Heathrow, Markets.com analyst Neil Wilson said that while the test is only available for Italy and Hong Kong, "it indicates that the world is slowly reopening and adapting".

Peel Hunt analyst Alexander Paterson was more sceptical, noting that the cost of the test appears "prohibitively high" and is significantly more expensive than the €10 charge for a test that may be taken on arrival in Italy.

"The cost is also extremely high relative to the cost of an intra-EEA short haul flight, with BA flights from LHR to Milan available from £74 including all taxes, particularly over the off-season such as the winter, where £80 would considerably more than double the cost of flying and would make it completely uncompetitive if offered to lower cost airlines such as easyJet, Ryanair and Wizz Air at the UK airports that they operate from," he said.

Paterson pointed out that Ryanair flights from Stansted to Milan are currently available for £7.99 including all taxes.

"We are also concerned that these rapid tests are likely to be significantly less accurate than the PCR tests with 3-4% false positives," he said. "An error rate this high would mean 6-8 passengers were wrongly denied boarding on an average short haul flight, which if they were travelling as part of a family, would result in 6-8 passenger groups not being able to travel."