London (CNN Business)Airline stocks tumbled Thursday after President Donald Trump imposed a 30-day ban on travel from most of Europe, increasing the risk that carriers struggling to cope with fallout from the coronavirus outbreak could run out of cash in the coming weeks and require government bailouts.
Trump said the restrictions, which apply to Schengen Area countries including Germany, France, Italy and Spain, have been imposed to keep any new cases of coronavirus from entering the United States, where more than 1,200 people have been infected. Travelers within Europe’s Schengen Area are not subject to passport checks or border controls.
Bernstein analyst Daniel Roeska, who expects more governments to impose travel restrictions over the coronavirus, said there is a “decent chance” that some airlines will require government help in the next eight weeks.
Even stronger airlines will be put under pressure, said Roeska, and could be forced to quickly raise funds in the bond market. Faced with a cash crunch, some may seek financial assistance from governments.
“There are some differences [between airlines], but ultimately I don’t think the largest airlines will be in any grave danger,” he added. “It’s about being able to access cash within the next three weeks.”
Another problem for airlines: The US State Department on Wednesday urged citizens to reconsider all travel abroad due to the coronavirus pandemic.
Stocks plunge
Already battered airline stocks sold off heavily on news of the travel ban, which hits lucrative routes for some of the world’s largest carriers.
Shares of Lufthansa (DLAKF) fell by as much as 13% in Frankfurt, taking its losses this year above 40%. Air France-KLM (AFLYY) dropped as much as 18% in Paris and has shed more than 50% this year. Norwegian Air plunged 24%, bringing the heavily indebted budget carrier’s losses this year to 80% as investors fret over whether it will survive the crisis.
British Airways parent company IAG (ICAGY) fell as much as 12% in London before paring some losses, even though flights from the United Kingdom and Ireland have not been suspended.
Lufthansa, Delta (DAL) and United Airlines (UAL) will be most impacted by the travel ban because they hold the biggest share of the market for transatlantic flights, according to Roeska.
Shares of Delta were down 12% in early trading, while American Airlines (AAL) stock was off roughly 11% and United Airlines was down around 16%.
Roger Dow, CEO of the US Travel Association, a lobbying group based in Washington DC, said the government should consider “equally aggressive” steps to protect America’s workforce.
“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,” Dow said in a statement.
The International Air Transport Association said last week that global airlines stand to lose $113 billion in sales this year if the coronavirus continues to spread — similar to the aviation industry’s losses during the global financial crisis of 2008.
Major European airlines have taken dramatic steps to cut costs and shore up cash in recent weeks. Some have offered employees unpaid leave and paused or reduced hiring.
Smaller carriers are most vulnerable to the demand shock delivered by the coronavirus outbreak, as the collapse of struggling UK carrier Flybe earlier this month demonstrates.
Weak airlines that aren’t able to secure backing from investors or governments could suffer the same fate as Flybe or become takeover targets, especially in Europe, where industry consolidation is underway.
A hit to travel and tourism
Global cases of the novel coronavirus have now reached more than 124,500, with over 4,600 deaths worldwide, according to the World Health Organization, which has officially declared the virus a pandemic.
Travel, tourism and hospitality are feeling the effects of the coronavirus outbreak most acutely as companies ban business travel, conferences and events are canceled, and fewer people want to travel for recreation.
The index tracking travel and leisure shares on Europe’s Stoxx 600 was trading 12% weaker on Thursday, taking losses this year to 40%. The Dow Jones US Travel and Leisure index was down 10% in early trade -— it’s lost about 35% this year.
According to the US Travel Association, 850,000 international visitors entered the United States via Europe in March 2019, accounting for about 29% of total overseas arrivals and spending of about $3.4 billion.
— Eoin McSweeney and Charles Riley contributed reporting.
Original Article : HERE ;
from AllAbout https://allabout.pw/airline-stocks-crushed-as-trumps-europe-travel-ban-stokes-bailout-fears/
No comments:
Post a Comment