European airline shares tank after Trump orders new coronavirus travel restrictions

European airlines were sent reeling Thursday, after President Donald Trump abruptly announced unprecedented restrictions from Friday on travel to the U.S. from continental Europe.

The sweeping measures roiled Europe’s airline stocks during afternoon deals, with the travel and leisure sector falling nearly 10%.

Norwegian Air Shuttle, which has rapidly increased its transatlantic service to the U.S. in recent years, led the losses, tumbling more than 20% on the news.

Tui, Air France-KLM, easyJet, Lufthansa and British Airways owner IAG were all at least 5% lower Thursday afternoon.

In a televised address to the nation on Wednesday, the U.S. president laid out plans to suspend travel to the U.S. from more than two dozen European countries for 30 days.

The travel order is set to take effect from 11:59 p.m. ET on Friday. The U.K. and Ireland were not included in the travel ban.

The State Department has also issued a Level 3 warning that recommends U.S. citizens to reconsider all travel abroad, “even countries, jurisdictions, or areas where cases have not been reported may restrict travel without notice.”

It comes with the airline industry already under intense pressure, with companies scrambling to cut costs as the coronavirus spreads and new travel restrictions are introduced worldwide, sapping passenger demand.

“It is very, very challenging,” Daniel Lacalle, the chief economist at Tressis Gestion, told CNBC’s “Squawk Box Europe” Thursday.

“A huge, huge problem is that airlines need to work at almost full capacity to start to generate positive returns and very quickly they start to burn cash if they become idle,” he added.

Global cases of the coronavirus climbed above 126,000 Thursday morning, according to data compiled by Johns Hopkins University, with 4,641 deaths reported worldwide.

The WHO said Wednesday that the fast-spreading coronavirus could now be described as a pandemic. The outbreak has prompted many passenger airlines to report a significant drop in load factors — effectively, their proposition of occupied seats — in recent weeks.

“This is the crisis that will prove actually the European airline sector is better than many people think,” Daniel Roeska, senior research analyst at Bernstein Research, told CNBC Thursday.

“It will weed out some of the remaining carriers that are weaker and shouldn’t be here in the first place,” he added.

“We are fully aware of the latest developments concerning travel between certain European countries and the U.S. Our flights to and from U.S. are currently operating as normal,” a spokesperson from Norwegian Air Shuttle told CNBC via email Thursday.

Norwegian is reportedly expected to give further information about the U.S. travel restrictions later on Thursday.

Lufthansa, Germany’s largest airline, said via Twitter on Thursday that it was “currently assessing the impact” of Trump’s travel order.

“In this context, the safety and well-being of our customers and crews remains/is our highest priority,” it said.

“Following the entry ban announced by the U.S. for European countries, KLM is busy taking stock of the impact of this measure on our customers, flights, employees and the company,” a spokesperson from KLM told CNBC via email Thursday.

British Airways owner IAG declined to comment when contacted by CNBC Thursday morning.

A Heathrow spokesperson said Thursday that the airport was “working through exactly what this means for passengers.”

“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 U.K.,” they added.

— CNBC’s Leslie Josephs contributed to this report.