European airline stocks plunged as much as 20 per cent today after US President Donald Trump said he would restrict travel from Europe to the United States for 30 days to try to contain the spread of the coronavirus.
The surprise move is another setback for a sector that has been battered by earlier travel restrictions across the world and has been battling falling passenger volumes due to the virus outbreak, now declared a pandemic.
Credit Suisse analyst Neil Glynn said the transatlantic route was ‘the primary profit engine’ for European airlines.
With 20 per cent to 30 per cent of their passenger revenues coming from that route, Glynn highlighted the damage that would be inflicted in the coming weeks, and potentially well into the summer.
A clampdown on European travel to the United States will heap more pressure on airlines already reeling from the coronavirus pandemic, analysts said, raising the odds of government relief packages as billions of dollars of tourist spending vanish.
While the stock markets reel, European media and politicians are in uproar over Trump’s decision, with France24, a leading French news site, claiming the president’s plan will cause a ‘complete catastrophe’ for international airlines.
In this file photo taken on January 28, 2020 American Airlines planes are seen as passengers wait at O’Hare International Airport in Washington, DC
Oval Office address: Donald Trump finally addressed the nation about the coronavirus crisis from the White House on Wednesday and banned all travel to Europe
EU politicians have accused Trump of using Schengen countries as a scapegoat for his own poor response to the coronavirus.
The former prime minister of Romania, Dacian Cioloş, who now leads a European parliament party, Renew, tweeted: ‘Viruses know no borders or nationalities.
‘Nationalism & blame games are no antidote.
‘This is a global crisis, which requires global solidarity, @realDonaldTrump.
‘Containment measures are needed, but not arbitrary ones.
‘Europe will be your partner, but not your scapegoat. #COVID-19.’
French news sites also slammed Trump’s decision today, saying it is likely to exacerbate the economic situation of the air industry.
Le Monde said the stock market plunge shows the west ‘is incapable of a responding as one to the coronavirus pandemic’.
France24 said Trump’s plans would cause a ‘complete catastrophe’, and that the president was living up to his ‘America First’ slogan.
The 30-day curbs from Friday, which exclude Britain, Ireland and other countries outside the European Schengen passport-free travel area, are similar to those that went into effect targeting China on 1 February.
They come after the outbreak’s rapid spread across the European continent and in the United States.
Combined with a fresh US State Department advisory asking citizens to reconsider the need to travel globally, the move could create chaos at dozens of airports across Europe as passengers attempt a last-minute rush to fly to the United States before the ban takes effect.
Flights from Europe can still operate to a limited number of U.S. airports with enhanced screening under measures announced on Wednesday evening. But only US citizens, permanent residents and immediate family members will be allowed in, severely denting the passenger base and hurting the U.S. tourism industry.
Social media users in France are also astonished at Trump’s decision to exclude the UK from the travel ban, with users saying Brexit does not prevent COVID-19.
The new restrictions will particularly batter foreign carriers like Germany’s Lufthansa and Air France KLM SA that dominate the market for flights between mainland Europe and the United States and had already grounded dozens of planes, analysts said.
‘The ban on flights on Europe will really zap foreign carriers,’ said independent aviation analyst Mike Boyd of Boyd Group International.
Lufthansa said it was assessing the impact of the changes on its US operations, while Air France KLM did not respond immediately to a request for comment.
As well as slashing arrivals, the move is set to decimate spending by European tourists in the United States. In March 2019, European visitors to the U.S. accounted for 29 per cent of arrivals and £2.9billion of spending, the US Travel Association said.
Adriana Dileo and Brian Cardenas decided not to travel to Barcelona on hearing of the ban on travel from Europe while they were already in John F. Kennedy airport
‘Temporarily shutting off travel from Europe is going to exacerbate the already-heavy impact of coronavirus on the travel industry and the 15.7 million Americans whose jobs depend on travel,’ US Travel Association President Roger Dow said in a statement.
Airline stocks plunged nearly 10 per cent after Trump’s announcement, with shivers reverberating through the stock market.
Pan-European STOXX 600 dropping 4 per cent, mainly dragged down by the travel & leisure sector.
Air France KLM shares, which have lost more than half of their value since the coronavirus outbreak in Europe, dropped 15 per cent to August 2012 lows.
Germany’s Lufthansa and British Airways and Iberia-owner IAG fell 9 per cent. Cruise operator Carnival plunged to 11-year lows
The news sent shares in Asian carriers sliding during the region’s trading day, with analysts warning of a significant impact to come when European markets opened.
US President Donald Trump said the ban was needed because the country was entering a ‘critical time’ in the fight against the virus, which has spread across the United States and killed at least 37 people and infected 1,281.
US airlines had already slashed flight schedules to Italy, facing the largest European outbreak, and will take another hit from lower demand for flights from major destinations like France and Germany.
Travelers in JFK airport after the announcement were left unsure of their travel plans
Nicholas E. Callio, president of airline trade group Airlines for America, said the ban would hit US airlines, their employees and travellers ‘extremely hard’.
He said his group respected the need to take the unprecedented action, but Association of Flight Attendants-CWA President Sarah Nelson called the ban ‘irresponsible’.
‘There is no explanation for how this will help fight the spread of the virus,’ she said. ‘It makes little sense when the virus is already in the United States.’
William Reinsch, a former senior U.S. Commerce Department official and fellow with the Center for Strategic and International Studies said the restrictions would be ‘enormously disruptive’ to airlines, hotels and restaurants already taking a hit because many Americans are staying home.
‘I think the administration will be forced to provide some relief to the airlines,’ he said.
Boyd said American Airlines Group Inc was the relative winner among the U.S. carriers because its alliance with British Airways would do well carrying passengers to London.
People check in to a British Airways flight at the international terminal at LAX airport in Los Angeles on March 11. The United Kingdom is not included in the travel ban
‘Delta has alliances with Air France KLM, which will be shut down in trans-Atlantic markets. United’s alliance with Lufthansa leaves it with zero access to the E.U.,’ he said. ‘That sounds dire, but the fact is that with the news of the spread of the virus in Europe, the flights would be empty anyway.’
American Airlines said it was in contact with the U.S. government to understand and comply with the directive.
Delta Air Lines Inc said it would waive reservation change fees for customers traveling to, from or through Europe and Britain through May 31. United Airlines Holdings Inc and British Airways parent IAG did not respond immediately to requests for comment.
Shares in Asian carriers slumped after the news.
Qantas Airways Ltd fell 10 per cent as Australia weighed similar restrictions on travel from Europe. Singapore Airlines was down 4 per cent, as was Hong Kong’s Cathay Pacific Airways Ltd. Japan’s ANA Holdings and Japan Airlines were both down more than 5 per cent.