People walk through a sparse international departure terminal at John F. Kennedy Airport (JFK) as concern over the coronavirus grows on March 7, 2020 in New York City.
Spencer Platt | Getty Images
U.S. airline stocks plunged Thursday after President Donald Trump announced sweeping travel restrictions, including an unprecedented 30-day ban on foreigners arriving from most of Europe, a measure he said was necessary to stop new cases of coronavirus “from entering our shores.”
Trump in a televised address called the new coronavirus “foreign” and attacked Europe for not taking the same actions to control the disease that he had.
“As a result” of Europe’s inaction, Trump said, “a large number of clusters” of coronavirus “were seeded by travelers from Europe.”
Trump mischaracterized the restrictions in his national address, sowing confusion among airline employees, travelers and fears among investors about the additional financial hit the ban poses to carriers.
American Airlines shares were down 15% in premarket trading, United fell 15% and Delta dropped 13%.
Savanthi Syth, a Raymond James airline analyst called Trump’s travel restriction “a baffling move that appears to be based on political theater rather than facts.”
The director of the National Institute of Allergy and Infectious Diseases, Anthony Fauci, last month said travel restrictions are “irrelevant” if the coronavirus becomes a pandemic, which is how the World Health Organization characterized it on Wednesday. “When you have multiple countries involved, it’s very difficult to do; in fact, it’s almost impossible,” he said.
Airlines were already scrambling to cut costs by reducing flights, offering employees unpaid, voluntary leave and freezing hiring, as the virus spreads and new travel restrictions are implemented, sapping demand.
Trump in a televised address called the new coronavirus “foreign” and attacked Europe for not taking the same actions to control the disease that he had.
“As a result” of Europe’s inaction, Trump said, “a large number of clusters” of coronavirus “were seeded by travelers from Europe.”
Trump’s order bars most foreigners who have been in Europe in the last two weeks from entering the U.S. for 30 days. While it stopped short of a flight ban, the measure would likely further diminish demand for trans-Atlantic travel, prompting more flight cuts. It leaves it up to airlines to cut flights, similar to the entry restrictions on U.S.-bound travelers who were in China that the administration announced. The U.K. is exempt from the new order.
“This action will hit U.S. airlines, their employees, travelers and the shipping public extremely hard,” Nicholas Calio, president of Airlines for America, a trade group that represents airlines including American, Delta, United and delivery giants FedEx and UPS, said in a statement. “However, we respect the need to take this unprecedented action and appreciate the Administration’s commitment to facilitate travel and trade.”
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.”
The new coronavirus has been spreading within the U.S., prompting officials in some of the country’s biggest cities like San Francisco and Seattle to call off large public gatherings outright, or special events such as the St. Patrick’s Day parade in New York City. The National Basketball Association on Wednesday suspended the season after a Utah Jazz player tested positive for COVID-19, the formal name for the disease.
Trump has said his administration is working with the airlines, but it is not yet clear what type of aid is on the table and necessary.
Airline shares have plunged to multi-year lows because of the outbreak, which the World Health Organization deemed a pandemic on Wednesday. Aircraft manufacturer Boeing plunged 18% in Wednesday’s session, the most since 1974 after the company said it would halt hiring and draw down the entirety of a $13.8 billion loan due because of the coronavirus crisis.
The move pushed the Dow Jones Industrial Average into a bear market, or more than 20% below the record close set only last month.
Airlines had been gearing up for the peak spring and summer travel season, the most lucrative quarters of the year. But the coronavirus outbreak is now threatening to keep travelers at home for months, and travel restrictions could exacerbate travelers’ fears about going abroad months down the road, said Henry Harteveldt, a former airline executive and founder of travel consulting firm Atmosphere Research Group.
“A lot of people who were considering a trip to Europe may no longer do so,” he said. Many European travelers might also avoid the U.S. this summer out of fear of “being caught if restrictions are reinstated,” he added.
Airlines could invoke clauses in aircraft contracts to allow them to cancel or defer airplane orders, while they can also offer or order more unpaid employee leave and flight cuts to save money.
Airlines “have a fiduciary responsibility,” he said. “What that means in the process, employees and customers become collateral damage.”
Sara Nelson, president of the Association of Flight Attendants, which represents cabin crews at Norwegian, United, Alaska and others, said the Europe travel ban was “irresponsible” and sowed confusion in the industry because the administration walked back some parts of Trump’s televised address that suggested cargo could be included in the ban.
“We know tonight’s address will add greatly to the panic already spreading across the country and contributing to the dramatic drop in bookings,” she said. “The conflicting information and failure to focus our nation on saving lives is making this crisis worse. We are calling on all leaders in government to focus on solving the problem.”
In Europe, travel and leisure stocks tanked almost 10% Thursday morning, with airline stocks among those leading the losses.
Norwegian Air Shuttle, which has rapidly increased its transatlantic service to the U.S. in recent years, tumbled more than 21% on the news.
“We are fully aware of the latest developments concerning travel between certain European countries and the U.S.,” a spokesperson from Norwegian told CNBC via email Thursday.
“Our flights to and from U.S. are currently operating as normal,” they added.
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,” the statement said.
British Airways owner IAG declined to comment when contacted by CNBC Thursday morning.
— CNBC’s Christina Wilkie & Sam Meredith contributed to this report.
Source: Business - cnbc.com
