Airline stocks sink after Europe and Russia slap airspace bans

Shares in European airlines slid after most of Europe closed its airspace to carriers from Russia, which reciprocated with its own bans.

A Bloomberg gauge of European airlines dropped as much as 4.8% on Monday. In the broader market, the biggest decliners included British Airways-parent IAG SA, Deutsche Lufthansa AG and Air France-KLM. Smaller peer Finnair Oyj, which faces a wipeout of its Asian traffic amid the closure of Siberian airspace, lost 21% of its value.

The bans are an echo of the Cold War restrictions that caused airlines to fly circuitous intercontinental routes, and add another hurdle for carriers still recovering from the hit to travel caused by the Covid-19 pandemic.

The European Union said Sunday it will close its airspace to Russia, attempting to further isolate President Vladimir Putin after he ordered his troops to invade neighboring Ukraine. The collective action applies to any plane owned, chartered or otherwise controlled by a Russian person, European Commission President Ursula von der Leyen said. The U.K. has also banned Russian planes.

Shares in IAG fell as much as 5.9%. On top of the airspace ban, the carrier has been dealing with a systems outage that hit late Friday and caused more than 150 short-haul British Airways flights to be canceled through midday Saturday. British Airways said the disruption stemmed from a hardware issue and was not due to a cyber-attack.

European airlines are still struggling to recover from the Covid-19 pandemic that hit global travel demand, while surging oil prices are becoming an additional headache. Most airline shares never recovered from the pandemic, with those including Lufthansa, IAG and Air-France KLM still trading 30% to 60% below February 2020 levels.