World’s airlines savaged anew by Trump travel clampdown

President Donald Trump’s 30-day ban on Europeans traveling to the U.S. delivered a hammer blow to airlines, already facing $113 billion in lost revenue worldwide this year because of the coronavirus.

Foreign nationals who’ve spent two weeks in Europe, excluding the U.K., won’t be permitted to enter the U.S. from midnight Friday, Trump said late Wednesday from the White House. Minutes later, his administration told American citizens to reconsider all foreign travel.

Aviation stocks plummeted in early U.S. trading on Thursday, before a brief market-wide halt. A Standard & Poor’s index of nine U.S. airlines tumbled 11%, led by a 15% decline by United Airlines Holdings Inc., a 14% drop at American Airlines Group Inc. and a 12% slide for Delta Air Lines Inc.

Flight restrictions are cascading around the globe as the pandemic threatens to overrun more countries. Shares of Air France-KLM, one of the European airline groups worst hit by the U.S. action, fell the most since 2002. The industry as a whole has lost more than $100 billion in market value so far this year, based on the Bloomberg World Airline Index.

Trump’s controls will almost certainly mean more flights scrapped at European carriers and U.S. peers. Struggling companies like trans-Atlantic discounter Norwegian Air Shuttle ASA, whose stock plunged 27%, may be pushed closer to the brink. The government in Oslo said it’s examining steps to help the industry.

“Things are moving so fast,” said Brendan Sobie of the Sobie Aviation consultancy. “The crisis that the industry is facing right now is likely to be the worst in over 40 years.”

The Trump speech offered limited substantial steps beyond the travel ban, and failed to reassure nervous investors. The MSCI All-Country World Index of stocks extended losses to trade more than 20% below last month’s peak, signaling a bear market.

Restrictions on European travel will hit some of the most popular long-haul routes. France, Germany and the Netherlands are home to three of the top 10 gateways to America, 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 unprecedented strains before Trump’s measures. With the public increasingly avoiding travel for fear of contracting the virus, the International Air Transport Association warned that 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 following the U.S. announcement.

Sinking Valuations

Global airline stocks bore the brunt.

Air France-KLM fell as much as 18%, Deutsche Lufthansa AG dropped 13% and the six-member Bloomberg EMEA Airlines Index was down 10% as of 2:53 p.m. in Paris. Air France-KLM has lost about 55% of its market value this year. The carrier, which typically operates four daily flights between Paris and New York, said it’s assessing the restrictions.

The declines followed slumps in Asia. Qantas Airways Ltd. fell as much as 12% in Sydney—the Australian carrier has lost more than 42% in just three weeks—and Singapore Airlines Ltd. had its lowest close since September 2001.

Norwegian has plummeted 80% this year, even though the airline operates most of its U.S. services from London Gatwick. Its weakness reflects a debt burden and dwindling cash reserves, down to about $300 million. Norway’s transport minister, Knut Arild Hareide, said the U.S. ban will have “major consequences” and the government will take steps Friday to ease the pressure.

Among other measures, the European Union will ease a requirementthat carriers use at least 80% of airport takeoff and landing slots or risk losing them, a rule that had led some carriers to fly empty planes. Lufthansa has also said it may seek state support via a German program under which the government offsets lost wages during work halts.

The U.S. 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 big European carriers, the British Airways owner IAG SA is least exposed, he said, because the ban excludes the U.K. and Ireland—source of 85% of IAG’s trans-Atlantic flights. IAG fell 12% Thursday, less than major rivals.

U.K. Chancellor of the Exchequer Rishi Sunak said on BBC Radio that there will nevertheless be an impact on the British economy, both in terms of travel spending and supply chains.

The Trump crackdown caught many in the industry 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 had been braced for additional flight restrictions, but the focus was on Germany and Italy, countries with serious 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 industry back by $190 billion. “We’ll go back to the drawing board,” he said. “At the end of the day, the numbers are staggering.”

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.