President Donald Trump’s 30-day ban on Europeans traveling to the U.S. delivers a hammer blow to a global airline industry that was already at risk of losing as much as $113 billion in passenger revenue this year because of the coronavirus.
Foreign nationals who’ve been in European nations excluding the U.K. in the previous two weeks won’t be able to enter the U.S. from midnight Friday, Trump said from the White House. Minutes later, his administration told U.S. citizens to reconsider all foreign travel.
Flight restrictions or bans are cascading across the world as the outbreak threatens to overrun more countries. Since the start of the year, carriers have lost almost $84 billion in market value, based on the Bloomberg World Airline Index.
The U.S. controls will almost certainly mean more scrapped flights at European and U.S. airlines—from Deutsche Lufthansa AG and Air France-KLM to United Airlines Holdings Inc. and Delta Air Lines Inc.—that have seen demand crater as the virus spreads. Struggling carriers like transatlantic discounter Norwegian Air Shuttle ASA may be pushed closer to the brink.
“Things are moving so fast,” said Sobie Aviation analyst and consultant Brendan Sobie. “The crisis that the industry is facing right now is likely to be the worst in over 40 years.”
Popular Routes
Restrictions on Europeans will hit some of the most popular routes to America. France, Germany and the Netherlands are home to three of the top 10 international gateways to the U.S., according to the U.S. Department of Transportation. The U.S. is the world’s largest air travel market, though China is catching up fast.
Airlines already faced an unprecedented crisis before Trump’s near-ban on Europeans entering the country. With the public increasingly avoiding travel for fear of contracting the virus, the International Air Transport Association warned passenger revenues might sink 19%, or $113 billion, this year. Even the trade group’s most optimistic outlook baked in revenue losses of $63 billion.
“As the scenario continues to evolve, so does the assessed impact,” IATA, which represents about 290 airlines globally, said in a statement Thursday after the U.S. announcement.
Sinking Valuations
Global airline stocks are tumbling as the outlook darkens. After Trump’s statement, Qantas Airways Ltd. dropped as much as 12% in Sydney—the Australian carrier has lost more than 42% in just three weeks—and Singapore Airlines Ltd. was headed to its lowest close since September 2001. Cathay Pacific Airways Ltd., which on Wednesday warned of a substantial first-half loss due to the virus, declined as much as 5.3% in Hong Kong.
United and Air France-KLM have lost about half their market value this year. The French flag-carrier, which typically operates four daily flights between Paris and New York, said it’s assessing the restrictions. Norwegian, which has seen its stock plummet 75% this year, was spared a direct hit, as it operates most of its U.S. service from London Gatwick airport.
The ban affects about 3,500 flights per week and will hurt Lufthansa, Delta, and United the most, said Daniel Roeska, an analyst with Sanford C. Bernstein. Among European majors, British Airways owner IAG SA is least exposed, because the ban excludes the U.K., he said.
The scale of Trump’s crackdown caught many off-guard.
“This action will hit U.S. airlines, their employees, travelers and the shipping public extremely hard,” Airlines for America President and Chief Executive Officer Nicholas E. Calio said in a statement. “However, we respect the need to take this unprecedented action.”
The travel industry was braced for additional flight restrictions, but had expected them to be limited to Germany and Italy, countries with heavy coronavirus outbreaks, said Scott Solombrino, executive director of the Global Business Travel Association.
‘Staggering Numbers’
The trade group had just finished calculating that falling demand for travel to Europe could set the travel industry back $190 billion. “We’ll go back to the drawing board,” he said. “At the end of the day, the numbers are staggering.”Solombrino spent much of his week talking with his members about potential bailout packages spanning airlines to hotels. “Everybody is looking for financial assistance,” he said. The next step the industry fears is a domestic flight ban, Solombino said.
The slump in air-travel demand is so severe it’s now a matter of survival for some airlines, said Shukor Yusof, founder of aviation consultant Endau Analytics in Malaysia.
“Numbers become increasingly less important than helping airlines make it through,” Shukor said. “It’s only a matter of time before financially weak carriers collapse.”
Trump’s controls on travelers from Europe don’t apply to legal permanent residents and immediate family members of U.S. citizens. Americans arriving from Europe will travel through specific airports where they can be screened for the virus.
The U.S. Travel Association said 850,000 visitors flew in to the country from Europe, excluding the U.K., last March, accounting for 29% of total overseas arrivals. The visitors spent about $3.4 billion in the U.S., it said.
“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,” the association’s President Roger Dow said in a statement.
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