Airline crisis deepens as US quarantines Europeans

European carriers worst hit as shares battered; Norwegian Air slumps 25%

PARIS/ LOS ANGELES: European airlines bore the brunt of a dramatic expansion of the coronavirus crisis on Thursday as US 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 US 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 US 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 shares fell 6.7%, with Lufthansa down 7.5% and British Airways (BA) parent IAG 8.4% lower as of 1143 GMT.

Norwegian Air, struggling to stay afloat even before the virus outbreak, slumped 24.6%. Heavily US-dependent Icelandair was down 18.4%.

The US curbs on travel from the 26-country Schengen area - which excludes Britain and Ireland - are similar to those that took effect for China on February 1 and do not apply to US residents or their immediate family. The latest US setbacks could make coronavirus worse than previous aviation crises including the 9/11 attacks of 2001, UK-based consultant John Strickland said.

Total meltdown

The US 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 is in talks with the Swedish and Danish governments about support measures, a spokeswoman said, without elaborating.

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 US 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,” US Travel Association President Roger Dow said.

Published in The Express Tribune, March 13^th, 2020.

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