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Airlines call for urgent help after US imposes travel ban

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Via Financial Times

Airlines demanded immediate action from governments to alleviate the deepening crisis engulfing the industry after US president Donald Trump banned non-US citizens from travelling to the US from most European nations to limit the outbreak of coronavirus.

Share prices across the aviation sector tumbled on Thursday in response to the ban, which mirrors restrictions the US already has in place on travel from China and Iran. 

Norwegian Air Shuttle said it was grounding 40 per cent of its long-haul fleet and laying off up to 50 per cent of its staff following the ban and plummeting demand. It was also cancelling up to 25 per cent of its short-haul flights until the end of May. 

“The new restrictions imposed further pressure on an already difficult situation,” said Jacob Schram, chief executive of Norwegian. “We urge international governments to act now to ensure that the aviation industry can protect jobs and continue to be a vital part of the global economic recovery.” 

Shares in Air France-KLM and Lufthansa, Germany’s flagship carrier, both dropped more than 10 per cent as the US ban darkened an outlook for an airline sector estimated to be facing a hit of at least $100bn from the pandemic.

Although the UK and Ireland are not affected by the ban, no airline escaped the declines. Shares in IAG, the owner of British Airways, were down 10 per cent, while the stock of heavily indebted Norwegian Air Shuttle plunged more than 30 per cent. US carriers were also hit: United Airlines lost 20 per cent of its equity value and Delta shares were down 16 per cent in late New York trading.

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Boeing’s shares also fell 13 per cent, extending a historic rout that has led to the share price of the world’s largest maker of passenger aircraft halving in the past month.

One airline chief executive told the Financial Times this was now “the worst crisis in the history of aviation”. He added that the US action was “a very dangerous game to play. It reminds me of the financial crisis. There will be failing airlines.”

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Thomas Reynaert, managing director at Airlines for Europe, the trade body for European carriers, warned that quick action was needed to reduce the impact of the crisis.

A4E, which represents airlines including Lufthansa and Air France-KLM, called for a range of measures including the immediate implementation of a temporary suspension of airport slot rules until the end of the summer season. It also urged a delay to new aviation taxes at EU and national level, and a change to Europe’s air passenger compensation rules to limit the financial liability of airlines in extraordinary circumstances, such as the current coronavirus outbreak.

“It is also vital that any national measures proposed by countries to support their national industries do not undermine the competitiveness of European airlines or otherwise disadvantage EU aviation,” added Mr Reynaert.

Aviation analysts said the US ban would have a devastating impact on airlines, with the restriction affecting 3,500 flights a week and as many as 800,000 passengers.

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Daniel Roeska at Bernstein said it would be more substantial than a similar restriction placed on flights to China, as the North Atlantic represented a large part of European airlines’ profits from long-haul flights.

The travel restrictions will come into effect from midnight on Friday. The US state department also asked Americans to reconsider travelling overseas. Both Air France-KLM and Lufthansa said they would continue to fly a more limited schedule of flights to the US during the travel ban. 

Iata, the global airline trade body, last week warned that the industry was in crisis because of the global spread of the coronavirus, which it estimated could cost airlines as much as $113bn in revenues this year. Airlines have already cancelled tens of thousands of flights, withdrawn earnings guidance and implemented austerity measures to cope with the travel slump. 

Alexandre de Juniac, director-general of Iata, said the US travel ban will create “enormous” cash flow pressures for airlines. 

“We have already seen Flybe go under. And this latest blow could push others in the same direction. Airlines will need emergency measures to get through this crisis,” he added.

Jon Horne, president of the 40,000 strong European Cockpit Association, which represents pilots, said: “This crisis is going to be grim. It is neither a Gulf war nor SARS, not 9/11, or the 2008 financial crisis, but all of them together.” 

Emirates on Thursday announced plans to start thermal screening measures for all passengers travelling on US flights from Dubai airport, with effect from this evening.

Additional reporting by Andrew Edgecliffe-Johnson

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