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Airline crisis deepens as U.S. puts Europeans in coronavirus quarantine – Metro US

Airline crisis deepens as U.S. puts Europeans in coronavirus quarantine

By Laurence Frost and Lisa Baertlein

PARIS/LOS ANGELES (Reuters) – Airlines bore the brunt of a dramatic expansion of the coronavirus crisis on Thursday, as U.S. 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 U.S. airline partners, analysts warned, as the move hit travel stocks already battered by the virus outbreak.

Those routes account for 20-30% 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 U.S. 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 U.S. airlines slumped in turn to new lows, with Delta and United Airlines down more than 13% and American Airlines 7.2% lower.

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

The U.S. 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 U.S. 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.

U.S. 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.

U.S. 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.

‘TOTAL MELTDOWN’

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.

CRITICAL TIME

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 U.S. move for flight schedules. IAG is potentially less impacted thanks to BA’s Heathrow base.

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

The fallout is also spreading fast from travel and tourism to aerospace and other industries.

Safran , the world’s third-biggest aerospace group, sees a growing threat to aircraft and engine order books, Chief Executive Philippe Petitcolin said on Thursday, adding more cost cuts were now being drawn up.

ADP declined to comment on a report it was preparing to close Terminal 3 at Roissy Charles de Gaulle, the French capital’s main aviation hub. Norway may close several airports, operator Avinor said.

Italy announced the partial closure of Rome’s main airports to commercial aviation in response to its own travel lockdown. Near-empty airports in Milan and elsewhere may follow, a government source told Reuters.

(GRAPHIC: European airlines crater – https://fingfx.thomsonreuters.com/gfx/mkt/13/3299/3260/airlines.png)

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 U.S. 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,” U.S. Travel Association President Roger Dow said.

(Reporting by Lisa Baertlein in Los Angeles, Laurence Frost in Paris and David Shepardson in Washington; Additional reporting by Sarah Young in London, Jamie Freed in Sydney, Toby Sterling in Amsterdam, Victoria Klesty in Oslo, Anna Ringstrom in Stockholm, Sayantani Ghosh in Singapore, Tracy Rucinski in Chicago and Andrea Shalal in Washington; Editing by Kenneth Maxwell, Tim Hepher and Mark Potter)