Via Financial Times

EasyJet and Ryanair led a plunge in European airline shares on Monday, as an outbreak of coronavirus in Italy ignited fears that travel across the continent will grind to a halt.

The airlines and hotel sectors most exposed to Europe were the hardest hit on a day marked by steep falls on stock markets from London to Milan. By early afternoon in London easyJet shares were down 15 per cent, Ryanair stock had dropped 12 per cent and Accor, one of Europe’s largest hotel groups, was down 6.3 per cent.

“What had been priced in by the market so far was weakness in China and a little bit of spillover into Asia Pacific from concerns about Chinese tourists not travelling so much,” said Harry Martin, a leisure analyst at Bernstein. “But today the panic is if we are going to have a global slowdown in travel.”

The concern in markets came even as Brussels said it had no plans to suspend the continent’s Schengen free travel zone and warned against a “panic” reaction to the news that Italian authorities had quarantined at least 10 towns in the north of the country.

The threat of disruption to European travel comes on top of the slowdown hoteliers and airlines have faced in China, the epicentre of a virus that has already claimed more than 2,500 lives.

“If [coronavirus] spreads further — say more widely into Europe — then we believe travel and lodging companies would be among the first to experience subdued earnings and cash flows,” analysts at rating agency S&P Global noted.

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However, investors were not waiting to find out as European carriers were subjected to heavy selling. Shares in both IAG, the parent company of British Airways, and Air France-KLM were each down 10 per cent. Norwegian Air suffered an 8 per cent drop.

The International Air Transport Association warned last week that the virus would inflict a $1bn hit on airline industry’s revenues, as it scrapped its forecast that global passenger numbers would rise this year.

InterContinental and Accor were punished hardest among hoteliers, as investors targeted those companies with significant exposure to Europe. InterContinental generates about 30 per cent of its revenues in Europe, while Accor relied on the continent for more than half its sales last year.

Tour operators did not escape, either. Shares in Tui, the world’s largest tour operator, fell almost 11 per cent, while those in rival Carnival were down 6 per cent.

Travel industry executives said they were awaiting further guidance from the World Health Organization, pointing to a sharp rebound the market enjoyed in 2003 when the SARS virus was contained.

Kevin Kopelman, an equity analyst at the investment bank Cowen, said that affected regions began to recover three to four months after the first report of SARS and that the market returned to “pre-outbreak levels” later the same year.

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Additional reporting by Bethan Stanton