President Donald Trump’s travel ban on European citizens entering the US due to coronavirus fears sent airline stocks to new lows today after weeks of pressure on the sector.
Recent FTSE 100 dropout Tui led the falls, posting a 10.4 per cent decline by the mid-morning, while British Airways owner IAG was not far behind, down 8.6 per cent.
Low-cost carriers Easyjet and Ryanair fell 5.9 per cent and 4.5 per cent respectively, whilst European giant KLM-Air France fell 15 per cent and Lufthansa nearly nine per cent.
Norwegian Air, which is widely tipped as a serious candidate to follow Flybe into bankruptcy due to its debt pile, fell over 21 per cent, with shares trading at around €0.70.
According to an HSBC note by analyst Andrew Lobbenberg, 46 per cent of Norwegian’s 2020 capacity is scheduled to serve the US market.
He added: “Its bookings are disproportionately weighted to United States point of sale. Whilst this demand was already extremely weak, as COVID-19 impacted confidence, we think it will come close to drying up altogether.
“We expect Norwegian to need to ground a significant share of its long haul aircraft”.
Trump’s travel ban, which will come into effect on Friday, covers 26 EU countries and will last for 30 days. The UK and Ireland are currently exempted from the restrictions, which the president labelled “the most aggressive and comprehensive effort to confront a foreign virus in modern history”.
However, the measures mean further punishment for the aviation industry, which has already borne the brunt of the coronavirus’ impact on the world economy due to a complete slump in passenger demand.
Airlines have been suspending flights and cutting whole routes, especially to China and Italy, Europe’s worst hit country, in an attempt to cushion against the financial damage the virus will cause.
Yesterday Lufthansa cancelled 23,000 flights due to the “exceptional circumstances” of the virus’ spread.
Dr Loizos Heracleous of Warwick Business School said the ban “could be the straw that breaks the camel’s back for many of the weaker airlines.
“The industry as a whole will consolidate. Ultimately, it’s central to the global economy, so it’s here to stay”.
A spokesperson for Heathrow Airport said: “Following the US Government’s announcement, we are working through exactly what this means for passengers travelling through Heathrow.
“We continue to work closely with Government, Public Health England, Border Force and airlines to ensure the safety of our passengers, colleagues and the wider UK”.
CMC Markets head of markets Michael Hewson said that the woe was likely to be compounded “by speculation that the UK will probably move to the next phase of its coronavirus action plan which could mean the introduction of temporary bans on large scale gatherings and the closure of schools and colleges.
“This is likely to mean the postponement of large sporting events which in turn would hit the companies like Premier Inn owner Whitbread as people travel less to large sporting events around the country as well as the possible postponement of Euro 2020”, he added.
Bernstein analyst Daniel Roeska said that the ban would hit Europe’s major carriers worse than the Chinese suspensions, as North Atlantic flights account for a larger share of long-haul profits.
Last week the International Air Transport Association (IATA) has said that the coronavirus could cost the global industry up to $113bn this year, nearly four times larger than previous estimates.