Published in: The Daily Star

Date: 15 Mar 2020

Airlines bore the brunt of a dramatic expansion of the coronavirus crisis on Thursday, as US travel curbs on much of continental Europe deepened the sector’s misery and piled more pressure on governments to offer emergency support.

The 30-day restrictions will badly disrupt transatlantic traffic key to the earnings of major European carriers and their US airline partners, analysts warned, as the move hit travel stocks already battered by the virus outbreak.

Those routes account for 20-30 per cent of large European operators’ 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.”  Glynn added: “A ban on travel to the US will likely mean heavier cuts” than the drastic capacity reductions already ordered as airlines scrapped flights – first to China and then to other destinations including Italy as the virus spread.

Shares in European and US airlines slumped in turn to new lows, with Delta and United Airlines down more than 13 per cent and American Airlines 7.2 per cent lower.

Air France-KLM was down 9.1 per cent at 1506 GMT, with British Airways parent IAG down 10.7 per cent and Lufthansa 11.5 per cent lower. Troubled Norwegian Air and US-dependent Icelandair both plunged more than 20 per cent.

The US curbs on travel from the 26-country Schengen Area – which excludes Britain and Ireland – are similar to restrictions on China that took effect on Feb. 1 and do not apply to US 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” earnings impact than European carriers had suffered from the earlier China flight suspensions.

US 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.

Among them, American Airlines could be relatively spared by its alliance with British Airways (BA) and higher share of UK traffic, while Air France-KLM partner Delta and Lufthansa ally United Airlines are likely to suffer more, analysts say.

US Vice President Mike Pence defended the travel curbs on Thursday, after the European Union complained they had been imposed “unilaterally and without consultation”.

The virus has taken root in the United States after spreading from China to Italy, South Korea, Iran and elsewhere.

Airlines had already been scrambling to respond to a global travel slump that looks increasingly likely to require government aid to avoid widespread insolvencies. The EU will publish new state-aid guidelines on Friday.

Germany may extend loans and other support to airlines, a government official said on Thursday. The French government also stands ready to help Air France-KLM, Finance Minister Bruno Le Maire said.

“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 is in talks with the Swedish and Danish governments about potential support measures, a company spokeswoman said.

EU airlines have seized on the crisis to push back on green taxes designed to help the bloc meet climate goals – including proposals to end current tax exemptions on jet fuel.

“New fiscal burdens should be postponed until the industry is back on a sound operational and financial footing,” lobby group Airlines for Europe said.

The latest travel clampdown 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 still studying the implications of the US move for flight schedules. IAG is potentially less impacted thanks to BA’s Heathrow base.

There were panicky European airport scenes as travellers scrambled to fly to the United States before the restrictions take effect late on March 13.

Source:

https://www.thedailystar.net/business/news/airline-crisis-worsens-us-quarantines-europeans-1880857