Airline crisis deepens as U.S. puts Europeans in coronavirus quarantine
PARIS/LOS ANGELES (Reuters) – European airlines bore the brunt of a dramatic expansion of the coronavirus crisis on Thursday, as U.S. travel curbs on much of the continent deepened the sector’s misery and piled more pressure on governments to offer emergency support.
The 30-day restrictions announced by U.S. President Donald Trump will badly disrupt the transatlantic traffic at the core of major airlines’ business, analysts warned, as the move hammered travel stocks already battered by the virus outbreak.
Those routes account for 20-30% of large airlines’ revenue and a majority of profit, Credit Suisse analyst Neil Glynn warned, “highlighting the damage to revenue lines for the coming weeks and potentially well into the summer.”
He added: “A ban on travel to the U.S. will likely mean heavier cuts” than the already drastic capacity reductions set in motion as airlines scrapped flights, first to China and then to other destinations including Italy, as the virus spread.
Air France-KLM (AIRF.PA) shares fell 6.7%, with Lufthansa (LHAG.DE) down 7.5% and British Airways (BA) parent IAG (ICAG.L) 8.4% lower as of 1143 GMT.
Norwegian Air (NWC.OL), struggling to stay afloat even before the virus outbreak, slumped 24.6%. Heavily U.S.-dependent Icelandair (ICEAIR.IC) was down 18.4%.
The U.S. curbs on travel from the 26-country Schengen Area – which excludes Britain and Ireland – are similar to those that took effect for China on Feb. 1 and do not apply to U.S. residents or their immediate family.
“The ban effectively stops travel from the Schengen Area to the USA,” said Bernstein analyst Daniel Roeska – predicting a “more substantial” impact than European carriers had suffered from the earlier China flight suspensions.
The latest U.S. setbacks could make coronavirus worse than previous aviation crises including the 9/11 attacks of 2001, UK-based consultant John Strickland said.
“It’s coming at the end of the northern hemisphere winter, which is a weak period for airline finances (when) they should be sowing seeds of a strong summer season by getting the bookings in,” he said.
Air France-KLM and Lufthansa said they were studying the implications of the U.S. clampdown. IAG, potentially less impacted thanks to BA’s Heathrow base, declined to comment.
The fallout is also spreading fast from travel and tourism to aerospace and other industries.
Safran (SAF.PA), the world’s third-biggest aerospace group, sees a growing threat to aircraft and engine order books, Chief Executive Philippe Petitcolin said on Thursday, adding more cost cuts were now being drawn up.
ADP (ADP.PA) declined to comment on a report it was preparing to close Terminal 3 at Roissy Charles de Gaulle, the French capital’s main aviation hub. Norway may close several airports, operator Avinor said.
Italy announced the partial closure of Rome’s main airports to commercial aviation in response to its own travel lockdown. Near-empty airports in Milan and elsewhere may follow, a government source told Reuters.
(GRAPHIC: European airlines crater – here)
The U.S. move came as airlines were already scrambling to respond to a global travel slump that looks almost certain to require government aid to tide companies through the crisis. The European Union will publish new state-aid guidelines on Friday.
“There is a need for measures from many governments,” said Norwegian pilots’ union president Yngve Carlsen. “This could lead to a total meltdown.”
Scandinavian carrier SAS (SAS.ST) is in talks with the Swedish and Danish government about support measures, a spokeswoman said, without elaborating.
President Trump said the clampdown was needed as the United States enters a “critical time” in the fight against the virus, which has taken root in the country after spreading from China to Italy, South Korea, Iran and other countries.
There were panicky scenes at European airports as travelers scrambled to bring forward travel to the United States before the restrictions take effect late on March 13.
Among U.S. carriers, American Airlines (AAL.O) could be relatively spared because of its alliance with BA and higher share of UK traffic, while Air France-KLM partner Delta Air Lines (DAL.N) and Lufthansa ally United Airlines (UAL.O) could suffer more, independent aviation analyst Mike Boyd said.
“But the fact is that with the news of the spread of the virus in Europe, the flights would be empty anyway,” he added.
U.S. airlines had already cut flight schedules to Italy and will take another hit from lower demand for flights from major destinations such as France and Germany.
Nicholas E. Callio, president of airline trade group Airlines for America, said the ban would hit U.S. airlines, their employees and travelers “extremely hard”.
The U.S. Association of Flight Attendants-CWA called the ban “irresponsible” in comments by its president, Sarah Nelson.
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“There is no explanation for how this will help fight the spread of the virus,” which was already in the United States, she said.
The travel curbs will also decimate European tourists’ spending in the United States. In March 2019, European visitors accounted for 29% of arrivals and $3.4 billion in spending, the U.S. Travel Association 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,” U.S. Travel Association President Roger Dow said.
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